On Wednesday 10 July 2019, the European Court of Auditors (ECA) will publish a special report on the EU-wide bank stress tests.
The auditors examined whether the 2018 EU-wide bank stress test run by the European Banking Authority (EBA) was fit for purpose. They checked criteria for selecting banks and the process for identifying risks. They also assessed whether the EBA had assurance about banks’ results and whether their publication allowed to conclude whether the EU financial system was resilient.
The report is expected to acknowledge the enhanced transparency on bank data, but point to a need for greater coordination and focus on risks. The auditors are expected to make a number of recommendations to the Commission and the EBA, including on the selection of banks and risks, supervision of results and EBA governance.
The EBA was established in 2010, with one of its tasks being to run EU-wide bank stress tests, which it did in 2011, 2014, 2016 and 2018. The aim of the tests was to assess the resilience of the EU financial system and to examine whether European banks would remain viable in the event of shocks such as a severe recession, stock-market crash or a loss of confidence.
The 2018 stress test included 48 banks in 15 countries - Austria, Belgium, Germany, Spain, Finland, France, Ireland, Italy, and the Netherlands, Denmark, Hungary, Norway, Poland, Sweden, and the United Kingdom. In the first nine, the European Central Bank is the main supervisor for large and significant banks; in the remaining six, this role is performed by the competent national authorities.
The ECA’s special reports set out the results of its audits of EU policies and programmes or management topics related to specific budgetary areas. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks to performance or compliance, the level of income or spending involved, forthcoming developments and political and public interest.