On 17 June 2020, the European Banking Authority (EBA) published its first peer review of stress tests and the resilience of deposit guarantee schemes (DGSs). The review assessed the results of 135 DGS stress tests performed by 32 DGSs from 27 EU Member States.
The Deposit Guarantee Schemes Directive (DGSD) requires Member States to ‘ensure that DGSs perform stress tests of their systems’. In 2016, the EBA issued guidelines on stress tests of DGSs that set out the scope and principle‐based requirements of DGS stress tests and a list of four ‘priority tests’ that DGSs are required to perform and report on to the EBA by 3 July 2019, by means of a predefined reporting template. The DGSD, in turn, requires the EBA to use these reports to conduct a peer review of all DGSs across the EU, and to do so at least every 5 years.
Using the grading system outlined in the guidelines on stress tests of DGSs, the EBA has arrived at the view that the overall resilience of DGSs across the EU is ‘fair’, which is the second best result, after ‘optimal’. This means that most DGSs have identified areas for improvement on the basis of the tests, that the shortcomings are isolated and/or can easily be addressed by the DGSs at the point of failure, and are unlikely to affect the ability of DGSs to perform their tasks in line with the DGSD.
In relation to the COVID‐19 pandemic, the report includes an early indication of how to improve the framework by exploring how to incentivise DGSs to perform ‘special’ tests that allow them to assess scenarios resulting in severe business continuity problems, such as a pandemic, power outages or significant operational disruptions The EBA also identifies 20 good practices that were deployed by a number of DGSs; these can be considered advice for other DGSs to take note of.