Crisis? Which crisis? How ECB stress test failed to see Strait
Banks were told to design geopolitical shock scenarios, but some focused mainly on tariffs
When the war in Iran and closure of the Strait of Hormuz raised the threat of a global energy shock in late February, officials at the European Central Bank’s single supervisory mechanism (SSM) felt vindicated. Just under three months earlier, they had asked the 110 banks the SSM directly supervises to carry out a reverse stress test specifically around geopolitical risk.
The test required the banks to develop a geopolitical risk scenario that would lead to a depletion of at least 300 basis
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