EBA consults on stress tests for deposit guarantee schemes

EBA consults on stress tests for deposit guarantee schemes (press release):

The European Banking Authority (EBA) launched today a public consultation on its draft Guidelines on stress tests of Deposit Guarantee Schemes (DGSs). The proposed Guidelines will provide the methodological principles to assess whether the operational and funding capabilities of DGSs are sufficient to ensure deposit protection in the event of a bank failure. In line with the Deposit Guarantee Schemes Directive (DGSD), these Guidelines will promote the quality and the consistency of these stress tests. The resulting data will also facilitate future peer reviews by the EBA, contributing to a safe and sound EU framework for the benefit of depositors and financial stability. The consultation runs until 8 February 2016.

The Guidelines launched for public consultation today will require DGSs across the EU to establish a programme of tests over a period of two to five years, covering specific scenarios and indicators. The broad types of intervention scenarios (simulations of failure) to be tested are provided, as well as the key areas to be assessed. DGSs will test the various possible uses of funds provided for under the DGSD. These include payout, contribution to resolution funding and, where allowed under national law in accordance with the DGSD, contribution to failure prevention. The EBA also specified the main testing areas, which range from data access to operational resources, to communication and payments; and for each area a series of indicators will have to be measured.

The EBA based this work on existing practices, organisational and cross-sector principles, so as to ensure that stress tests performed by DGSs address relevant points. The proposal puts in place a framework for stress tests that will produce objective, comprehensive, and comparable results across the EU.

While the guidelines apply without any time limit, DGSs will be requested to run a number of priority tests and to report the results to their own authorities and the EBA by 3 July 2019. This will in turn enable the EBA to deliver its first peer review in 2020. The templates annexed to these Guidelines will facilitate the collection of data in a consistent and comparable way.

Consultation process

Comments on this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. The deadline for the submission of comments is 8 February 2016.

All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will then take place at the EBA premises on 19 January 2016 from 14.00 to 16.00 UK time.

Legal basis and next steps

These draft own-initiative Guidelines have been developed according to Article 16 and 26(2) of Regulation (EU) No 1093/2010 (EBA founding Regulation) in order to promote a common and consistent approach to DGS stress tests between DGSs throughout the Union, which must be performed pursuant to Article 4(10) of the DGSD, and to contribute to strengthening the European system of national DGSs in accordance with Article 26(1) of the EBA founding Regulation