EBA stress tests: adverse scenario toughened up

Stress tests underway for European banks use harsher adverse scenario and tighter capital rules than tests carried out last year

The European Banking Authority (EBA) has toughened up the stress scenario in its latest round of banking industry health-checks, after last year's exercise - managed by EBA forerunner, the Committee of European Banking Supervisors - was derided as too easy to pass.

European banks will test their end-2010 balance sheets against both a baseline economic scenario of moderate annual growth over the next two years in the EU, and against an adverse scenario of flat or negative growth. Under the