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.
Keywords: Europe, EU, Banking, Stress Testing, Basel III, Systemic Risk, ECA, EBA
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