EU-Wide Stress Test: The Experience of the EBA

Paolo Bisio, Demelza Jurcevic and Mario Quagliariello

In the midst of the financial crisis, the European Banking Authority (EBA) was established on January 1, 2011, with a broad remit that included safeguarding the stability of the EU financial system.¹¹ High Level Group on Financial Supervision in the EU published a report in February 2009, the so-called De Larosière Report. The aim of the report was to lay out a framework to take the EU further in its process of integration, which includes (i) a new regulatory agenda (Basel III), (ii) stronger coordinated supervision (eg, EBA) and (iii) effective crisis-management procedures. According to its founding regulation,²² Regulation (EU) No. 1093/2010 of the European Parliament and of the Council of November 24, 2010. 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. While the stress test is a key component of the EBA’s toolkit, it is only one of a range of supervisory tools used by the EBA for assessing the resilience of individual institutions as well as the overall resilience of the European banking system.

The first EU-wide