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EBA will not run EU-wide bank stress test in 2015

The European Banking Authority will not run an EU-wide stress test this year, but will run a 'transparency exercise' to gather data on banks' balance sheets and portfolios, it has said.04 Mar 2015

The transparency test will be similar to one run in 2013, the EBA said.

A stress test assesses how resilient financial institutions are to adverse market developments, and assesses the overall systemic risk in the EU financial system, the EBA said.

The decision not to run a test in 2015 was made in based on the progress that EU banks have made in strengthening their capital positions in response to the 2014 asset quality reviews and stress test, the EBA said.

Banking expert Tony Anderson of Pinsent Masons, the law firm behind, said: "It is encouraging that the EBA deems it not necessary to run the full stress tests in 2015. In the meantime, an environment of enhanced prudential scrutiny and regulation, together with greater competition from non-banks into traditional services such as payments is becoming normalised for European and UK banks post-financial crisis."

Prior to 2014, banks had strengthened their capital positions by over €200 billion (US$223 billion), prompted by an EBA recapitalisation exercise in 2011/12, and started the 2014 exercise with a CET1 (Common Equity Tier 1) ratio of capital to risk of 11.5%.

The largest EU banks' CET1 ratio has improved and now stands at 12%, compared to 9.2% in December 2011, the EBA said.