In March 2020, the EBA decided to postpone the EU-wide stress test exercise to 2021 to allow banks to focus on and ensure continuity of their core operations, including support for their customers. The objective of the EU-wide stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of EU banks and the EU banking system to shocks, and to challenge the capital position of EU banks.
2021 EU-wide stress test final methodology
In this regard, in November 2020, the EBA published the final methodology, draft templates and template guidance for the 2021 EU-wide stress test. The exercise is based on a common methodology, internally consistent and relevant scenarios, and a set of templates that capture starting point data and stress test results to allow a rigorous assessment of the banks in the sample.
Executive summary
The EBA published the final methodology, draft templates and template guidance for the 2021 EU-wide stress test along with the key milestones of the exercise. The methodology and templates include some targeted changes compared to the postponed 2020 exercise, such as the recognition of FX effects for certain P&L items, and the treatment of moratoria and public guarantees in relation to the current COVID-19 crisis.
Scope of application
This draft methodology of the 2021 stress test is applicable to supervisors, banks and other market participants.
Main content
- Sample of banks and scope of consolidation. 49 EU banks will participate in the exercise covering broadly 70% of the banking sector in the euro area, each non-euro area EU Member State and Norway. The scope of consolidation is the perimeter of the banking group as defined by the CRR/CRD.
- Reference date. The exercise is carried out on the basis of year-end 2020 figures, and the scenarios will be applied over a period of 3 years from end 2021 to end 2023.
- Macroeconomic scenarios. The stress test includes a baseline scenario and an adverse scenario, applied over a period of 3 years from end 2021 to end 2023.
- Risk coverage. Banks are required to stress test the following common set of risks: credit risk, market risk, counterparty credit risk (CCR), credit valuation adjustment (CVA) and operational risk.
- Results. The impact of the EU-wide stress test will be reported in terms of CET1. In addition, the Tier 1 capital ratio and total capital ratio, as well as the leverage ratio, will be reported for every year of the exercise.
Download the technical note by clicking here (also available in spanish).