EBA reveals guidelines for first stress tests on deposit guarantee schemes

The European Banking Authority (EBA) has published guidelines for the first stress tests on the European Union's deposit guarantee schemes (DGSs).

The guidelines aim to enforce a "sufficient level of quality and consistency" on all European DGS stress tests, the EBA said on May 24.

A 2014 European Commission directive requires the schemes to complete stress tests every three years, with the first tests to be carried out no later than July 3, 2017. Under the guidelines, schemes must carry out four "priority tests" by July 2019.

These include a check of all "single customer view" files held by a scheme's affiliated credit institutions. Priority tests also include tests of schemes' "operational capability" under stressed conditions, and of how their funding withstands a "payout or resolution scenario".

Schemes with responsibility for at least one branch in a different European state must also carry out an operational cross-border test, in co-operation with another DGS.

When all priority tests have been completed, the EBA will then carry out a peer review of European DGS stress tests by July 2020.

The guidelines also set out methodological principles for the conduct of stress tests, as well as prescriptions on the scenarios to be used and areas to be tested.

DGSs will be able to "calibrate their tests in a way proportionate to their membership", the EBA said. If a DGS has to carry out a real-life intervention which tests some of its capacities, the EBA said, it will be allowed to present data on this instead of carrying out a simulation.