EU-wide Stress Test Versus SCAP and CCAR: Region-wide and Global Perspectives

Piers Haben, Caroline Liesegang and Mario Quagliariello

The European Banking Authority (EBA) is required by its founding regulation to initiate and coordinate EU-wide stress tests to assess the resilience of banks to adverse market developments. The first such stress test was performed by the Committee of European Banking Supervisors (CEBS), the EBA’s predecessor, in 2009. The individual results of the stress test were kept confidential. In 2010, CEBS performed another EU-wide stress test, and this time an aggregate report as well as individual bank results were published.

Building on the experience of two previous stress tests, the newly established EBA conducted a stress test among 91 banks in 2011. This exercise was undertaken in coordination with national supervisors, the European Systemic Risk Board (ESRB), the European Central Bank (ECB) and the European Commission (EC). The objective of the stress test was to assess the solidity of the EU banking system and the solvency of individual institutions to stress events. The 2011 EBA stress test was a constrained bottom-up exercise. Banks were required to use their internal models for estimating possible losses, although the EBA identified common minimum methodological assumptions and