EBA欧洲银行-EBA-ST-2011-004-Annex-2-_General-features-of-the-adverse-scenario_9页_115kb

2011 EU-Wide Macroeconomic Adverse Scenario Summary

1. Core Content and Design

The 2011 EU-wide stress test scenario is designed to evaluate the impact of a severe macroeconomic downturn on the European banking system. It spans the period 2011–2012 and is based on the latest available Autumn 2010 European Commission (EC) forecasts. The scenario combines EU-specific shocks and global negative demand shocks with USD depreciation, aiming to simulate a highly adverse environment.

Key Components of the Scenario:

• EU Sovereign Debt Crisis Aggravation:

  • A significant increase in long-term interest rates, with an average rise of 75 basis points in the euro area and 66 basis points in the EU.
  • Germany's bond yields remain at baseline levels, while other euro area countries experience higher volatility.
  • The shocks are distributed based on recent volatility in sovereign credit default swap (CDS) spreads.

• Stock Market Decline:

  • A 15% average decline in stock prices in the euro area.
  • A 14% average decline in the EU as a whole.
  • The shock is calibrated according to national stock market volatility.

• House Price Reductions:

  • A permanent country-specific exogenous shock to house prices, starting in early 2011 and leveling off by the end of the year.
  • The shock is linked to the fall in confidence and country-specific conditions related to the EU debt crisis.
  • Some house prices are affected by fundamentals, such as overvaluation.

• Money Market Tensions:

  • A 125 basis point increase in short-term inter-bank interest rates, reflecting renewed tensions in the European money markets.

• Domestic Demand Shock:

  • A negative exogenous shock to consumption and investment, with stronger effects in the euro area than in the rest of the EU.
  • The shock materializes faster in the euro area (from Q1 2011 to Q2 2012) than in the rest of the EU, which is affected with a six-month lag.

• Global Shocks:

  • A worldwide negative demand shock originating in the US, starting in Q2 2011.
  • The shock gradually affects the rest of the world over the next two quarters.
  • A 4% USD depreciation in nominal effective terms is assumed at the beginning of the horizon.
  • Oil and non-oil commodities are unaffected by the global slowdown.
  • Monetary policy is assumed not to react to these shocks.

2. Main Results and Impacts

2.1 EU-Wide GDP and Inflation Effects

• EU GDP Growth:
  • Reduced by 1.3 percentage points in 2011 and 1.5 percentage points in 2012.
• HICP Inflation:
  • Lower by 0.1 percentage point in 2011 and 0.5 percentage point in 2012.
• Unemployment Rate:
  • Increased by 0.6 percentage points in 2011 and 1.3 percentage points in 2012.

2.2 Euro Area and Non-Euro Area Effects

• Euro Area GDP:
  • Reduced by 2.0 percentage points in 2011 and 2.0 percentage points in 2012.
• Euro Area HICP Inflation:
  • Lower by 0.5 percentage points in 2011 and 1.1 percentage points in 2012.
• Non-Euro Area GDP:
  • Reduced by 2.4 percentage points in 2011 and 1.9 percentage points in 2012.
• Non-Euro Area HICP Inflation:
  • Lower by 0.7 percentage points in 2011 and 1.9 percentage points in 2012.

2.3 Rest of the World Effects (Table 2)

• Global GDP Growth:
  • Reduced by 1.5 percentage points in 2011 and 0.3 percentage points in 2012.
• CPI Inflation:
  • Reduced by 0.1–0.5 percentage points in most non-EU countries.
• Unemployment Rates:
  • Increased in several countries, such as New Zealand (up 4.4 percentage points in 2011) and South Korea (up 3.0 percentage points in 2011).

2.4 Probability of Scenario Occurrence

• The probability of the overall GDP shock for 2011 is slightly below 1%, compared to 7% previously.
• For 2012, the probability remains at 4%.
• The inflation shock has a higher probability, at 10% for 2011 and 7% for 2012.

3. Scenario Path Based on Baseline Forecasts

The adverse scenario is derived by adding the deviations from the baseline (Autumn 2010 EC forecasts) to the original projections. The resulting GDP and inflation paths are as follows:

3.1 EU GDP and Inflation (Table 3)

• EU Real GDP:
  • Falls by 0.4% in 2011, with zero growth in 2012.
• EU HICP Inflation:
  • Falls by 0.6% in 2011 and 1.3% in 2012.
• Unemployment Rate:
  • Rises by 0.5 percentage points in 2011 and 1.4 percentage points in 2012.

3.2 Euro Area GDP and Inflation

• Euro Area Real GDP:
  • Negative 0.5% in 2011 and 0.2% in 2012.
• Euro Area HICP Inflation:
  • Falls by 0.5% in 2011 and 1.1% in 2012.
• Euro Area Unemployment Rate:
  • Rises by 0.3 percentage points in 2011 and 1.2 percentage points in 2012.

3.3 Magnitude of Shocks (Table 4)

• Government Bond Yields:
  • Increase by 75 basis points in the euro area and 66 basis points in the EU.
  • The largest increase is in Ireland (258 basis points).
• Stock Prices:
  • Fall by 15% in the euro area and 14% in the EU.
  • The largest decline is in Ireland (-23.1%).

3.4 House Price Deviations (Table 5)

• EU House Prices:
  • Fall by 3.8 percentage points in 2011 and 11.6 percentage points in 2012.
• Country-Specific House Price Declines:
  • Malta experiences the largest drop: -6.3% in 2011 and -23.8% in 2012.
  • Lithuania and Slovakia show the most severe declines: -7.6% and -4.7% in 2011, respectively.

4. Conclusion

The 2011 adverse scenario is a severe macroeconomic downturn that combines EU-specific shocks (sovereign debt crisis, asset price declines, and money market tensions) with global demand shocks and USD depreciation. It results in a significant reduction in GDP growth and lower inflation, with the euro area being more severely impacted than the rest of the EU. The scenario is designed to test the resilience of the EU banking system under extreme conditions, with a probability of occurrence slightly below 1% for 2011 GDP and 4% for 2012 GDP. The results highlight the increased vulnerability of the euro area and the gradual transmission of shocks to the broader economy.