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The 2018 EBA/ESRB Stress Test Exercise and its impact on ERM frameworks

Complimentary webinar powered by Marcus Evans

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 discussed:

  • The main role of EBA/ESRB Stress Test exercise in the banking organizations and its expected path of development
  • Credit Risk assessment and Net Income projection to understand the technical and organizational challenges faced by the banks in implementing EBA/ESRB Stress Test Exercise in 2018
  • How robust IT infrastructures are a prerequisite for deploying a methodological consistent framework for Stress Testing
  • The next challenges that lie ahead in European banks in terms of integrated balance sheet simulation, both from a business and regulatory perspectives

Prometeia Speaker

Elisa Galassi - Prometeia

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.