Internal stress tests of EU banks not up to scratch – ECB

Only one in 10 banks’ internal tests are tougher than supervisor-run programmes

Banks’ homespun stress tests are not tough enough to suitably prepare them for real-world crises, the European Central Bank says. They also lack the scope and complexity to capture the range of threats they face.

Self-run stress tests produced an average maximum Common Equity Tier 1 (CET1) depletion of 3.3% across a sample of European banks, far lower than the 4.8% projected under the supervisor-run stress test of 2018. Only one in 10 banks ran tests that produced a greater capital ‘burn’ than

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