The EBA’s Board of Supervisors agreed to launch the 2011 EU-wide stress testing exercise with National Supervisory Authorities on 4 March 2011. The stress test, which will be conducted on a large number of European banks, involves a series of detailed technical steps and, as a consequence, will take several months to run. It will be run against a baseline and an adverse macro economic scenario in order to assess the solvency of the banks involved in the exercise against hypothetical adverse economic events. The adverse macro-economic scenario, designed by the ECB, will incorporate a significant deviation from the baseline forecast and country-specific shocks on real estate prices, interest rates and sovereigns. This is in line with the EBA’s micro-prudential objective of analysing institution-specific prudential soundness
The EBA will provide the banks with details of the scenarios by the end of this week, after which there will be a period of discussion and feedback. The EBA plans to publish the macro-economic scenarios along with the sample of banks involved, on 18 March 2011. The EBA is working with the ESRB and national supervisors to finalise the details of the methodology for the stress test. In addition, the EBA continues its dialogue with Member States and EU Authorities regarding the remedial back stop measures that Member States will put in place to address any weaknesses that the stress test may reveal. Pending the outcome of these discussions, the EBA anticipates being able to publish the broad principles of the stress test methodology in April. Following a vigorous peer review, the EBA will publish the final results of the exercise in June.