European Banking Authority outlines 2016 stress test

The test will feature many aspects of the 2014 EU-wide stress test, and will be based on a constrained bottom up approach, including a static balance sheet assumption and wide risk coverage to assess EU banks' solvency.

The 2016 EU-wide stress test will however, build on the lessons learned from previous exercises and, for example, will be more closely aligned with the cycle of the annual supervisory review and evaluation process, to ensure the results of the stress test are incorporated as an input to that process.

The draft methodology and templates will be discussed with relevant stakeholders before the end of 2015 and the detailed aspects and milestones of the exercise will be communicated in the coming months.

The 2016 EU-wide exercise is expected to be launched in the first quarter of 2016. The assessment and quality checks are expected to be concluded by the third quarter of 2016, when EU banks' individual results will be released.

Last year, all UK banks tested - including Barclays, HSBC, Lloyds and RBS - passed, but 24 failed, including Permanent TSB in Ireland.