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The Board of Supervisors of the European Banking Authority (EBA) agreed on the publication of the 2020 EU-wide stress test package, which includes the methodology, templates and template guidance. Similar to the 2018 exercise, the 2020 EU-wide stress test is a bottom-up exercise with constraints, including a static balance sheet assumption.
The exercise is primarily focused on the assessment of the impact of risk drivers on the solvency of banks. Banks are required to stress a common set of risks (credit risk – including securitisations – market risk and counterparty credit risk, and operational risk – including conduct risk). In addition, banks are requested to project the impact of the scenarios on net interest income and to stress P&L and capital items not covered by other risk types.
A draft version of the stress test templates is also published along with a template guidance that contains instructions on how to populate them. The draft version of the templates can still be subject to minor technical adjustments before its final publication.
Key milestone dates of the 2020 EU-wide stress test exercise