Constâncio: ECB working to overcome stress test limitations

ECB vice-president outlines shortcomings with existing framework

governadorvitorconstancio
Vítor Constâncio

The stress-testing framework used by the European Central Bank (ECB) has a number of limitations, especially with regard to macro-prudential considerations, its vice-president, Vítor Constâncio, said on October 29.

These limitations include a static balance-sheet approach and the failure of stress tests' models to consider the reactions of banks to adverse conditions. Current models also fail to properly model the relationship between liquidity and solvency, Constâncio told an audience in London

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