The 2014 European stress tests: impact report

Author: | Published: 28 Oct 2014


This report clarifies the difference between the EBA tests and the ECB tests; recaps the basic results of banks that failed the tests; and compares existing CoCo trigger levels with the test results.

1. What did the EBA and ECB test?

On October 26 2014, the EBA and ECB published the results of the European stress tests.

The EBA tests are based on a sample of 123 banking groups in the 28 EU countries.

The tests measure the CET1 ratio, the fundamental indicator of a bank’s health under CRD IV, in standard (baseline) and adverse economic projections. The projections are modelled on a 3-year horizon to 2016 and assume a static bank balance sheet, meaning the balance sheet is frozen as at the end of 2013 with the assumption that no growth would occur over the time horizon:

The baseline scenario assumes economic development in line with EC...