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Setting out the main outcomes of the stress test exercise during a press conference today, Bernardino stressed that it was too early for the supervisory authority to draw “absolute” conclusions about any systemic impact of IORPs’ vulnerability to market shocks or prolonged adverse market conditions, such as persistently low interest rates.
He emphasised that the deficits shown by the stress tests under the different adverse market scenarios – using either a National Balance Sheet assessment or the common methodology devised by EIOPA for cross-border comparison – did not represent funding shortfalls, and that there were various means by which economic and/or financial shocks could be absorbed by defined benefit schemes, such as long recovery periods or benefit adjustment mechanisms.
Bernardino acknowledged that some aspects of the stress test results “may seem obvious”, but he stressed the importance of having the data to show this. “That’s the first gain from the exercise,” he said, “both for supervisors and also in the engagement that supervisors will have with the national authorities. I wouldn’t say there is something striking, or something that was completely unexpected from the results of the exercise. But, when we look at the numbers and the impacts of the different scenarios, we get much better knowledge and a much better understanding of where the real vulnerabilities are.”
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