EU-wide stress tests for banks: unparalleled amount of information on banks provided but greater coordination and focus on risks needed

Summary:

This report assesses the implementation of the Union-wide bank stress test conducted under the mandate given to the European Banking Authority (EBA).The macroeconomic stress scenario was one of worsening economic conditions relative to the baseline scenario, but the shock was less severe than originally communicated.

The negative effects of the shock were concentrated in several large economies most of which performed quite well during the last recession, rather than on the countries that were most affected by that crisis. Furthermore, the scenario did not test banks against severe financial shocks, and some relevant systemic risks were insufficiently taken into account.

Owing to the lack of resources and the current governance arrangements, the EBA was not in a position to ensure “comparability and reliability of methods, practices and results”, as envisaged in the regulation. Instead, it had to rely primarily on national supervisors. On the positive side, a large amount of information was published.

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