Stress tests

The stress tests assess banks’ strength in the face of adverse macroeconomic scenarios (by estimating the impact on their solvency), or their resilience to other types of risks, such as liquidity or climate risk. The stress test results are published and enable vulnerabilities to be detected and addressed at an early stage. The results also feed into the regular supervisory review and evaluation process and can, therefore, affect capital requirements (P2R) and guidance (P2G) applicable to each bank (Pillar 2).

Every two years, the European Banking Authority (EBA) coordinates, with the national competent authorities, a stress test of a sample of the European Union’s largest banks. The tests consist of two scenarios – baseline and adverse – and are conducted using consistent methodologies and criteria across all banks. In parallel, the European Central Bank (ECB) complements these tests by adding to the sample all other significant institutions (SIs) under its direct supervision, applying the same scenario and criteria as the EBA. In consequence, all Spanish SIs are subjected to a stress test every two years.

In the alternate years when there is no EU-wide EBA stress test, the ECB conducts a thematic stress test on euro area SIs against a specific risk of its choosing.

In turn, every year the Banco de España performs a stress test – the Forward Looking Exercise on Spanish Banks (FLESB) – on less significant institutions (LSIs), ­using the same scenarios as in the EBA tests or EBA-recommended scenarios. The results of these tests are published in the Supervision Report.