The European Banking Authority (EBA) has published a document setting out the main features of the 2014 stress test along with a press release and FAQs, as well as a list of the names of the 124 banks that will be stress tested. The banks selected, include some major high street banks in the UK.
The resilience of the EU banks involved will be assessed over a period of three years (2014 – 2016). The banks will be required to stress a common set of risks including: credit risk, market risk, sovereign risk, securitisation and cost of funding. Both trading and banking book assets will be subject to stress, including off-balance sheet exposures. National regulators may include additional risks and country specific sensitivities beyond this common set but the published results should allow an understanding of the impact of the common set of risks in isolation. In terms of capital thresholds, 8% common equity tier 1 (CET1) will be the capital hurdle rate set for the baseline scenario and 5.5% CET1 for the adverse scenario. National regulators may set higher hurdle rates and formally commit to take specific action on the basis of those higher requirements.
The EBA intends to circulate a draft stress test methodology to banks and other market participants for feedback in March or April 2014 and to publish the final methodology and scenarios in April 2014. It expects to publish the final results of the stress test in October 2014.
View Main features of the 2014 EU-wide stress test, 31 January 2014
View EBA announces key features of the 2014 EU-wide stress test, 31 January 2014
View 2014 EU-wide stress test: frequently asked questions, 31 January 2014
View 2014 EU-wide stress test sample of banks, 31 January 2014