Holdings of sovereign debt will be included in European stress tests, which will include country-specific adverse scenarios designed by the ECB. There was some doubt whether sovereign debt would be included after Cebs, the EBA’s predecessor, was reported in November saying it wasn’t “clear that a repeat of the sovereign risk sensitivity analysis will be necessary in 2011″. How times change.
Collaboration on methodology will begin tomorrow (Friday) between the EBA and individual countries’ supervisory bodies. Scenarios plus the sample of banks will be published March 18. Broad principles of stress test methodology are expected in April. Several months will be needed to complete the tests, which will be published in June. (Note: new US stress tests, which are due for completion this month, will not be published.) And what will happen should a bank fail? Read more