The European Banking Authority (EBA) has launched its 2018 EU-wide stress test and released the macro-economic scenarios. For the first time the stress test incorporates International Financial Reporting Standard 9 accounting standards. Also, no pass-fail threshold has been included as the results of the exercise are designed to serve as an input to the Supervisory Review and Evaluation Process.
The adverse scenario in the stress test implies a deviation of EU GDP from its baseline level by 8.3% in 2020, resulting in the most severe scenario to date. The adverse scenario encompasses a wide range of macroeconomic risks that could be associated with Brexit. Elements of the baseline scenario reflect the average of a range of possible outcomes from the UK’s trading relationship with the EU.
The EBA expects to publish the results of the stress test exercise by 2 November 2018.
View EBA launches 2018 EU-wide stress test exercise, 31 January 2018