The European Banking Union has published the detailed methodology – but not yet the macro-economic assumptions – for its 2018 stress test.
The stress test methodology will be applied to 49 major EEA banks, covering around 70% of the banking sector. The exercise will be based on end-2017 data, and will run from end 2018 to end 2020. It assesses the resilience of banks under common macroeconomic baseline and adverse scenarios. Final results scheduled to be published by 2nd November, 2018.
No “pass or fail” capital thresholds will be applied, although the results will inform supervisory assessments of each bank.
Banks should check that they have the systems and data in place to follow this methodology - in particular the ability to take into account the introduction of IFRS9 from the beginning of 2018.
The detailed methodology defines how banks should calculate the stress impact of common scenarios and sets constraints for their bottom-up calculations. Key points are: