EU Bank Stress Tests Postponed To 2021 Due To Coronavirus

Law360, London (March 13, 2020, 3:10 PM GMT) -- Europe’s banking watchdog said that it is delaying this year's biennial stress test for banks until 2021 to allow lenders to focus on their operations and support their customers during the global coronavirus epidemic.

The European Banking Authority also recommended that national regulators postpone supervisory activities, including site visits. They could also give banks more time to submit supervisory reports. But crucial financial and prudential information must still be handed over to national authorities, the EBA said.

The latest test results, which look at whether lenders have the required capital buffers to survive severe shocks to the financial system, were due to be published in July. Instead, the EBA said it will complete a smaller exercise.

“For 2020, the EBA will carry out an additional (European Union)-wide transparency exercise in order to provide updated information on banks’ exposures and asset quality to market participants,” the EBA said in a statement Thursday.

The agency said it is coordinating its efforts with the European Central Bank and national regulators. The ECB on Thursday relaxed various capital requirements for EU banks to encourage lending during the outbreak.

The banking watchdog has published its EU-wide stress test every two years since 2011 in a bid to enhance transparency and restore trust in the sector after the financial crisis. The authority hopes the results will help banks become more resilient and capable of holding enough capital to protect themselves from market shocks.

The test uses a common methodology across the bloc and allows supervisors to make enforcement decisions.

The tests help expose which banks are weaker and more sensitive to shocks and rank them based on the level of risk they are taking. The last test,  completed in 2018, showed that Europe’s biggest banks could weather a severe economic downturn.

--Editing by Tom Mudd.

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