On 1 February 2021, the European Banking Authority (EBA) announced the launch of its 2021 EU-wide stress test and released the macro-economic scenarios.

The stress test will be conducted on a sample of 50 EU banks – 38 from countries under the jurisdiction of the Single Supervisory Mechanism – covering approximately 70% of total banking sector assets in the EU and Norway, as expressed in terms of total consolidated assets as of end 2019.

The stress test will be similar to previous ones and will be based on a bottom-up projection from banks subject to constraints and a static balance sheet approach. However, the support measures deployed in response to the COVID-19 pandemic have required some changes. This year’s methodology clarifies the treatment of COVID-19 EBA-compliant moratoria and COVID-19 public sector guarantees. In particular, moratoria should not be considered in banks’ projections, while maturing loans guaranteed by COVID-19 public sector guarantees should be replaced with the guarantee for calculating the projections. Additional information will also be collected on exposures benefitting from COVID-19 moratoria and public guarantee schemes for public disclosure and to support quality assurance. Also connected to the COVID-19 pandemic, the 2021 methodology reflects the amendments to the Capital Requirements Regulation that were published in the Official Journal of the EU in June 2020 (the CRR Quick Fix). In addition, some specific changes have been introduced to recognise FX variations for certain P&L items. In line with what was planned for the postponed 2020 exercise, in the 2021 EU-wide stress test the transparency templates provide information on Pillar 2 requirements for each bank at the starting point, i.e. December 2020.

The EBA expects to publish the results of the exercise by 31 July 2021.