03 March 2015
In its meeting on 24 February 2015, the Board of Supervisors of the European Banking Authority (EBA) decided not to carry out an EU-wide stress test in 2015 and to start preparing for the next exercise in 2016. Instead of a stress test, in 2015, the EBA will be running a transparency exercise in line with the one conducted in 2013, which will provide detailed data on EU banks' balance sheets and portfolios. This decision has been communicated to the European Parliament, the Council and the Commission.
The decision not to run an EU-wide stress test in 2015 was driven by an acknowledgement of the progress that EU-banks have made in strengthening their capital positions in response to the 2014 asset quality reviews and EU-wide stress test. Moreover, these efforts were preceded by several years of capital raising spurred by the EBA's 2011/12 recapitalisation exercise, which led EU banks to strengthen their capital positions by over EUR200bn and to start the 2014 exercise with a CET1 ratio of 11.5%. The largest EU banks CET1 ratio now stands at over 12% against 9.2% in December 2011.
According to Article 93 of its Regulation, the EBA shall consider whether it is appropriate to carry out EU-wide stress tests at least annually and to inform the European Parliament, the Council and the Commission of the reasons behind its decision.
An EU-wide stress test assesses the resilience of financial institutions to adverse market developments, as well as to contribute to the overall assessment of systemic risk in the EU financial system.