The Committee of European Banking Supervisors (CEBS) issued a statement on the EU-wide stress test exercise currently being finalized. The scope of the stress testing exercise has been extended to include not only the major EU cross-border banking groups but also key domestic credit institutions in Europe. In each EU Member State, the sample has been built by including banks, in descending order of size, so as to cover at least 50 per cent of the national banking sector, as expressed in terms of total assets. For the EU banking sector as a whole, the 91 banks represent 65 per cent of the EU banking sector. The results of the stress test will be disclosed, both on an aggregated and on a bank-by-bank basis, on 23 July 2010. The release also provides a list of institutions covered by the stress testing.
Following its statement issued on 18 June 2010, CEBS provides further information on the EU-wide stress test exercise which is now being finalised by CEBS and the national supervisory authorities, in close cooperation with the ECB.
The objective of the extended stress test exercise is to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks, and to assess the current dependence on public support measures.
The exercise is being conducted on a bank-by-bank basis using commonly agreed macro-economic scenarios (baseline and adverse) for 2010 and 2011, developed in close cooperation with the ECB and the European Commission.
The macro-economic scenarios include a set of key macro-economic variables (e.g. the evolution of GDP, of unemployment and of the consumer price index), differentiated for EU Member States, the rest of the EEA countries and the US. The exercise also envisages adverse conditions in financial markets and a shock on interest rates to capture an increase in risk premia linked to a deterioration in the EU government bond markets.
On aggregate, the adverse scenario assumes a 3 percentage point deviation of GDP for the EU compared to the European Commission’s forecasts over the two-year time horizon. The sovereign risk shock in the EU represents a deterioration of market conditions as compared to the situation observed in early May 2010.
© CEBS - Committee of European Banking Supervisors
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article