The European Central Bank (ECB) has today published the list of 39 euro area banks that will participate in the 2016 EU-wide stress test conducted by the European Banking Authority (EBA). The EBA will coordinate the exercise in cooperation with national authorities and the ECB. The overall exercise will examine a total of 53 banks across the EU. It will help the public and other stakeholders to compare and assess the resilience of the banks, notably their ability to absorb shocks and meet capital requirements under adverse macroeconomic conditions.
In line with the selection criteria determined by the EBA, these banks cover 70% of total banking assets that are directly supervised by the ECB. For the first time, the sample has been defined from an SSMwide rather than a national perspective. The 19 countries subject to ECB Banking Supervision will be treated as a whole when calculating asset coverage, instead of taking a country-by-country approach.
The EU-wide stress test is expected to be launched at the end of February 2016, at which time the EBA will also release the final methodology, templates and scenarios. The outcome of the exercise, including banks’ individual results, is expected to be published at the beginning of the third quarter of 2016. For those significant institutions not covered by the EBA stress test, the ECB will conduct in parallel its own stress test which, while consistent with the EBA methodology, will also give due consideration to the lower size and complexity of these institutions. Stress test results for all significant institutions will be used to assess Pillar 2 capital needs of individual banks in the context of the Supervisory Review and Evaluation Process (SREP).
The ECB stress test will also support macroprudential supervision. Using its own, top-down, stress-testing framework, the ECB will challenge banks’ (bottom-up) results and assess their macroprudential implications.
For the sample of euro area banks subject to the exercise, please see the EBA draft methodology:
https://www.eba.europa.eu/risk-analysis-and-data/eu-wide-stress-testing/2016
