EBA欧洲银行-Guidelines-on-institutions-stress-testing-28EBA-GL-2018-0429_42页_599kb

EBA Guidelines on Institutions' Stress Testing (EBA/GL/2018/04)

Core Content

These guidelines, issued under Article 16 of Regulation (EU) No 1093/2010, outline supervisory practices for stress testing by financial institutions within the European System of Financial Supervision. The guidelines aim to ensure consistency, transparency, and effectiveness in the application of stress testing methodologies, focusing on both solvency and liquidity aspects.

Main Views and Key Information

1. Compliance and Reporting Obligations

• Compliance Requirement: Competent authorities and financial institutions must comply with these guidelines, incorporating them into their practices (e.g., legal framework or supervisory processes).
• Notification Deadline: Competent authorities must notify the EBA by a specified date whether they comply with or intend to comply with the guidelines, or provide reasons for non-compliance.
• Non-Compliance Consequence: Failure to notify by the deadline will be considered non-compliance by the EBA.
• Reporting Process: Notifications must be submitted via the EBA's online form, referencing 'EBA/GL/201x/xx', and sent to compliance@eba.europa.eu. Any changes in compliance status must also be reported.

2. Subject Matter, Scope, and Definitions

• Solvency Stress Test: Assesses the impact of scenarios on an institution's capital position, including minimum or additional own funds requirements.
• Liquidity Stress Test: Evaluates the impact of scenarios on an institution's liquidity position, including minimum or additional liquidity requirements.
• Bottom-up Stress Test: Conducted by institutions using internal models, based on their own data and assumptions, and focused on specific portfolios or the institution as a whole.
• Top-down Stress Test: Conducted by competent or macroprudential authorities, using general assumptions and aggregate data, aiming for a common framework across institutions.
• Static Balance Sheet Assumption: Assumes a constant balance sheet and stable business model, enhancing comparability.
• Dynamic Balance Sheet Assumption: Allows for changes in the balance sheet and evolving business models, reflecting management responses.
• Portfolio Level Stress Test: Focuses on individual or multiple portfolios and their exposure to specific risk factors.
• Sensitivity Analysis: Measures the impact of a single or simple multi-risk factor on a portfolio or the institution.
• Scenario Analysis: Involves assessing resilience to a set of risk factors that are internally consistent and forward-looking.
• Reverse Stress Test: Starts from a predefined outcome (e.g., failure of the institution) and explores scenarios that could lead to it, used as a risk management tool.
• Second-round or Feedback Effects: Spillover effects from individual institution responses to shocks, potentially amplifying or mitigating the original impact.
• Severity of Scenario: Refers to the degree of deterioration in macroeconomic and financial variables, determining the impact of the stress test.
• Plausibility of Scenario: Degree to which a scenario is likely to occur, based on coherence with current variables, narrative, and historical experience.
• Anchor Scenario: A scenario designed by competent authorities to set a severity benchmark for stress tests.
• Risk Data Aggregation: Process of collecting, sorting, and processing risk data to measure performance against risk tolerance.
• Data Infrastructure: Physical and organisational structures supporting risk data aggregation and internal risk reporting.

3. Implementation

• Date of Application: These guidelines apply from 01 January 2019.

• Repeal: The CEBS Guidelines on Stress Testing (GL32) are repealed with effect from the publication of these guidelines in all EU official languages.

• Stress Testing Programme: Institutions must establish a comprehensive stress testing programme covering:

  • Types of stress tests and their objectives
  • Frequency of stress testing exercises
  • Internal governance arrangements
  • Scope of entities in a group
  • Data infrastructure
  • Methodological details and interlinkages between solvency and liquidity stress tests
  • Range of assumptions and remedial actions

• Group Stress Testing Programme: Parent institutions in a Member State and EU parent institutions must develop a group-level programme to be approved by the management body and implemented by senior management.

• Programme Assessment: Institutions should assess the effectiveness and robustness of their stress testing programmes annually, using both quantitative and qualitative analysis.

• Documentation Requirements: The programme must be appropriately documented, including:

  • Stress testing approach
  • Interlinkages between solvency and liquidity stress tests
  • Roles and responsibilities
  • Process for designing, approving, and monitoring the programme
  • Data infrastructure and IT applications used
  • Risk appetite and limits

• Governance and Oversight: The management body must approve the stress testing programme and oversee its implementation, ensuring it reflects the institution's risk profile and is used in strategic and operational decisions.

4. Data Infrastructure

• Data Infrastructure Requirements: Institutions must ensure their data infrastructure is adequate, flexible, and of appropriate quality and control.
• Alignment with Basel Principles: Institutions should refer to the Basel Committee's principles for effective risk data aggregation and reporting.
• Data Management: Data must be accurate, reliable, complete, timely, and adaptable, capturing both on- and off-balance-sheet risks.
• Automation and Controls: Risk data aggregation should be largely automated, with reconciliation and control systems in place.
• Business Continuity Planning: Stress testing data infrastructure should be considered part of the overall IT infrastructure, with attention to long-term investments and business continuity.

5. Scope and Coverage of Stress Testing

• Material Risk Consideration: Stress tests must cover all material risks, including those from on- and off-balance-sheet assets and liabilities.
• Proportionality Principle: The scope of stress testing should vary according to the size, complexity, and risk profile of the institution, ranging from portfolio-level analysis to institution-wide scenario testing.
• Risk Correlations: Institutions must consider changes in correlations between risk types and factors, especially during times of financial distress.
• Risk Concentrations: Stress testing should identify intra- and inter-risk concentrations, including contagion effects.
• Group-Level Analysis: Institutions should conduct stress testing at the group level to capture systemic risks that may not be evident at the entity level.
• Holistic Risk Understanding: Institutions must ensure that all material risks are identified at the institution-wide level, with attention to overall risk concentrations.

Summary of Key Elements

• Compliance: Mandatory for competent authorities and institutions, with notification requirements.
• Definitions: Clear distinction between types of stress tests and related concepts.
• Programme Development: Comprehensive and flexible, covering all relevant risk areas and scenarios.
• Governance: Management body must be involved in approval, oversight, and strategic decision-making based on stress test outcomes.
• Data Infrastructure: Must be robust, automated, and aligned with international standards.
• Scope and Coverage: Tailored to the institution's size and complexity, capturing both individual and systemic risks.

These guidelines provide a structured and consistent framework for conducting stress tests, ensuring that institutions and supervisors are aligned in their approaches to risk assessment and management.