The European Banking Authority (EBA) has on 4 November published the final methodology, draft templates and template guidance for the 2023 EU-wide stress test along with the milestone dates for the exercise. The methodology and templates cover all relevant risk areas and have considered the feedback received from industry. The stress test exercise will be launched in January 2023 with the publication of the macroeconomic scenarios. The results will be published by the end of July 2023.
The 2023 EU-wide stress test uses a constrained bottom-up approach with some top-down elements. Balance sheets are assumed to be constant. Focus is on the assessment of the impact of adverse shocks on banks’ solvency. Banks are required to estimate the evolution of a common set of risks (credit, market, counterparty, and operational risk) under an adverse scenario. Banks are also asked to project the impact of the scenarios on main income sources. For net fee and commission income, risk weights of securitisation, and the credit loss path of sovereign exposures, banks are required to make use of prescribed parameters. The methodology includes the sample of banks participating in the exercise.
The stress test templates along with a template guidance are published in their draft versions as they can still be subject to minor technical adjustments before their final publication.
Milestone for the 2023 EU-wide stress test
- Launch of the exercise at the end of January 2023;
- First submission of results to the EBA at the beginning of April 2023;
- Second submission to the EBA in mid-May 2023;
- Third submission to the EBA at the end of June 2023;
- Final submission to the EBA in mid-July 2023;
- Publication of results by end-July 2023.