European Central Bank to stress test 99 eurozone banks in 2023
The European Central Bank (ECB) is set to stress test 99 eurozone banks in 2023 as it looks to “shed light on the impact of adverse shocks on banks’ resilience under challenging macroeconomic conditions”.
The ECB is set to stress test 99 eurozone banks in 2023
The ECB will examine 57 of the eurozone area’s largest banks, which were picked to cover 75% of the area’s banking assets, as part of the 2023 EU-wide stress test coordinated by the European Banking Authority (EBA).
A further 42 medium-sized banks, which do not fall under the EBA test remit due to their smaller size, will face similar tests conducted by the ECB. The stress testing for these banks will broadly match that for the EBA’s EU-wide test, applying the same scenarios as well as elements of the EBA methodology, but will take into account their smaller size and lower complexity.
The EBA will work with the ECB and national supervisory authorities to apply its stress test methodology and templates, as well as the scenarios provided by the European Systemic Risk Board (ESRB). The EBA plans to publish the results by the end of July 2023.
The testing will encompass a “bottom-up approach”, the ECB says, with banks applying their own models to project the impact of the scenarios, alongside a “thorough” review by the relevant authorities which will benchmark their main risk parameters.
The ECB will also carry out a “deep dive” on leveraged finance exposures for selected banks with material leveraged finance activities.
