The European Banking Authority (EBA) and the European Systemic Risk Board (ESRB) recently released the macroeconomic scenarios for the EU-wide stress tests to evaluate the resilience of banks to adverse market developments. Results are expected to be published by November 2018.
Banks are requested to estimate what the potential impact on their profits and capital may be under an adverse macro-financial scenario. The adverse scenario is set out by EBA-ESRB, starting from a baseline defined by the National Central banks.
The scenario covers three years, starting from the first quarter of 2018 (when the shocks are assumed to materialize) and ending in the last quarter of 2020. The macro-financial variables included in the scenario are commodity prices, exchange rates, foreign demand, stock prices, interest rates, GDP, inflation, unemployment, residential and commercial real estate.
The outcome of the exercise, as was the case for the 2016 Stress Test, will feed into the 2019 SREP requirements. There will be “no pass or fail” outcome based on a target level of CET 1 ratio triggering the need to implement remedial actions.
The methodology covers all relevant risk areas and, for the first time, will incorporate IFRS 9 accounting standards. The starting point for the exercise is the end-of-year 2017 balance sheet, restated to reflect the full IFRS9 effect.
In this webinar, leading Stress Testing experts discuss:
Elisa Galassi, Prometeia
Elisa Galassi is a senior manager at Prometeia for the Enterprise Risk Management Practice. In her multi-year experience she has assisted several banking groups in EMEA markets on the definition and activation of strategic and operative ALM processes and models, as well as regulatory reporting, and financial planning and control processes. She is currently in charge of all international pre-sales activities for the Enterprise Risk Management Practice.
Cecilia Gejke, Nordea
Cecilia has a background in Material Physics before joining the world of finance and risk management. She has a broad experience from institutions like Bear Stearns, JP Morgan, Mizuho and Nordea where she has worked across the various risk disciplines and regulations with a focus on capital & liquidity and balance sheet management with stress testing as the favourite tool.
Marc Irubetagoyena, Bnp Paribas
Marc Irubetagoyéna is a member of the Group RISK Executive Committees of BNP Paribas. In his current role, he is responsible for the global stress testing and financial synthesis platform of BNP Paribas. After his studies of Engineering, Finance and Statistics, Marc started his career in consulting at Arthur Andersen in 1999. He joined BNP Paribas in 2002 within Group the Performance Management team. He drove the implementation of a value creation steering program and contributed to BNL Spa integration. In 2006, he moved to the Global Equity and Commodity business, launching notably a Private Equity offer. In 2009, he came back to Group Finance to ensure the financial synthesis of the Retail Banking division. In 2011, he launched a joint team between Group Finance and Group ALM Treasury to steer the liquidity of the Bank and implement a regulatory liquidity reporting framework. In 2015, he took the role of CFO of the Global Market business line.