EBA Welcomes ECA Recommendations for Improving Stress Tests in EU
EBA welcomed publication of a special report by the European Court of Auditors (ECA) on the EU-wide stress tests. This report is the result of an audit conducted by ECA on the 2018 EU-wide stress test, while also considering aspects of the 2016 exercise. The report presents findings of the independent review on the stress tests for banks in EU and sets out recommendations for improving the stress tests going forward. EBA acknowledged the efforts made by ECA in providing valuable insights to improve the efficiency of the EU-wide stress test in the future.
The findings of the independent review highlight the leading role of EBA in providing transparency of information on EU banks' data and acknowledge the effort made by the staff in coordinating the exercise, especially considering the limited resources available. Among the recommendations listed, ECA prescribes to develop a top-down approach for stress tests to complement the current bottom-up approach, to expand the criteria to assess the sample of the exercise, and to publish all banks' minimum requirements. ECA also recommends that EBA should try different types of scenarios from one exercise to another (such as stressing different risks) and consider adding additional, more country-specific shocks or sensitivity analyses.
EBA takes note of the recommendations made by ECA and welcomes the constructive challenges that the independent review provides, being cognizant that the EU-wide stress test can be improved further. EBA is committed to considering the recommendations of ECA in its ongoing discussion on possible longer-term changes to the EU-wide stress test. In addition, EBA has already introduced greater transparency on additional own funds requirements (Pillar 2 requirements) in the 2020 EU-wide stress test draft methodology, in line with the ECA recommendation. EBA will keep ECA informed on the progress made in implementing the recommendations. The last section of the report also presents EC response to the findings of this independent review by ECA.
Related Links
Keywords: Europe, EU, Banking, Stress Testing, Basel III, Systemic Risk, ECA, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Previous Article
EC Approves Prolongation of Danish Resolution Scheme for Small BanksRelated Articles
APRA Issues Interim Update to Policy Priorities for 2021 and Beyond
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
EC Adopts Solvency II and Resolution Rules Package for Insurers
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
OCC Issues Booklets on Regulatory Reporting and Earnings
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
ECB Sets Out Results of Economy-Wide Climate Stress Tests
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
EBA Examines Implications of Increasing Use of Digital Platforms in EU
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
