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12 July 2011

ECOFIN Council conclusions: Stress tests in the banking sector

Finance ministers discussed this year's EU-wide stress tests in the banking sector and they agreed on common lines on how to respond after the publication of the results, in particular as regards measures to be taken with respect to financial institutions found to be vulnerable.

The stress tests, carried out across 91 banks for the period from 2011 to 2012, assess the prudential soundness of individual lenders, and at the same time provide valuable information on the resilience of the whole banking system.

This round of testing with its higher capital threshold is tougher than the two previous ones. The hypothetical financial storms used to estimate the health of banks include adverse events such as housing slumps and sovereign debt crises.

Should the tests reveal any weaknesses, Member States are expected to use remedial "backstop" mechanisms to address them promptly, if necessary. Depending on each institution and country, these mechanisms may cover a broad range of measures, both private and public (mergers and acquisitions or consolidation measures, refinancing, including directly from the market, etc.). They will be coordinated closely among Member States, while leaving scope for country-specific situations.

The London-based European Banking Authority (EBA) runs the tests together with national supervisory authorities, and the results will be published on the EBA website. Andrea Enria, the EBA's chairperson, took part in the discussion at the Council.

On publication of the results, ministers will issue statements, based on a common template, on their countries' backstop measures.

Full conclusions


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