European Banking Authority Publishes Guidelines on Stress Tests of Deposits Guarantee Schemes

The European Banking Authority published guidelines for upcoming stress tests of deposit guarantee schemes under the Deposit Guarantee Schemes Directive. The Directive introduced a number of measures to improve the resilience of deposit guarantee schemes in Europe and the EBA is required to perform stress tests every three years; the first is to take place by July 3, 2017. The purpose of the stress test is to verify whether the operation and funding capabilities of the DGS are sufficient to ensure deposit protection, within the conditions of the Directive, during times of increased pressure.  The EBA has decided to produce guidelines for consistency across the European Union and to ensure that the stress test is a credible assessment tool. 

The guidelines outline methodical principles that are intended to result in a systematic and comprehensive approach to planning, running and conducting stress test exercises.  The guidelines elaborate on the type of intervention scenarios that should be simulated by DGSs, as set out in the Directive, such as repayment, contribution in resolution and support for failure prevention. The guidelines require DGSs should test a broad range of operational and funding capabilities. The tests should cover the main functions activated when a DGS intervenes, such as access to data, operational resources, repayment periods and ability to meet liabilities with the alternative funding means at its disposal. The stress tests are to be run on a comparable basis in terms of scenario and test areas, in order to provide context for comparison. Results of the stress test are to be published by the EBA at least every five years.   The guidelines will apply from two months after publication of the official EU language versions.
 
View the Guidelines.