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Macroprudential Stress Testing

An introductory overview to the ECB approach


Macroprudential Stress Testing - The foundations of Stress Testing: an introductory overview to the ECB approach

The most original innovations often stem from necessity of overcoming unforeseen difficulties.

This is the case for macroprudential stress tests, a set of analysis techniques used by financial supervisory authorities since the great global financial crisis. This approach has resulted in the achievement of significant advances in the grasp of the mechanisms governing the interactions between the financial system and the real economy on the one hand, and between the former and international relations on the other.

This article addresses three issues: when were stress tests introduced in Europe; what microprudential stress tests are and their purpose; and what are their most recent developments.

At the end an overview of Prometeia offering within the SSM regulatory space is given.

The piece is adapted from an article that first appeared on bobsguide.com.