ESRB models long-lasting EU recession for stress tests

Tougher adverse scenario adopted because EU is “at an advanced stage of the financial cycle”

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The European Systemic Risk Board’s adverse scenario for this year’s European Union’s banking stress tests simulates worse financial stress than previous years’ equivalents.

The “more severe” scenario was “reflecting the fact that the EU is assessed to be at an advanced stage of the financial cycle and more extreme tail events have been considered”, the ESRB said. The scenario presents a “longer for lower” shock to the EU, with a long-lasting recession driving down real EU GDP by 4.3% between

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