EU-wide Stress Test: The Experience of the EBA

Pilar Gutierrez, Angel Monzon and Mario Quagliariello

The European Banking Authority (EBA) was established on January 1, 2011, with a broad remit that included safeguarding the stability of the European Union (EU) financial system. In particular, according to its founding regulation the EBA is required, in cooperation with the European Systemic Risk Board (ESRB), to initiate and coordinate EU-wide stress tests to assess the resilience of financial institutions to adverse market developments.

In fact, the first EU-wide stress test had already been performed by the Committee of European Banking Supervisors (CEBS), the EBA’s predecessor, in 2009, although the individual results of this stress test were kept confidential. In 2010, CEBS performed another EU-wide stress test among 91 banks. An aggregate report was published as well as, for the first time, individual bank results. In the aftermath of the financial crisis, a coordinated stress test was perceived as a possible way to facilitate consistent stress testing for cross-border banks in a single market, picking up region-wide risks that were emerging in pockets, and as a means to restore credibility when there was concern that national supervisors were being overly lenient in

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