A sample of 51 European banks will be put through a stress test this year designed to examine how resilient they are to losses.
The test, which covers about 70% of the European Union’s banking sector, won’t feature any Portuguese or Greek banks and won’t have a pass or fail mark.
The three-year economic scenario used to test the lenders features “foreign demand shocks, financial shocks and domestic demand shocks,” according to a statement from the European Banking Authority.
The scenario features “a deviation of EU GDP from its baseline level by 3.1% in 2016, 6.3% in 2017 and 7.1% in 2018,” as well as falls in the prices of residential and commercial real estate.
Only banks with €30 billion or more in assets were eligible to join the test. “Smaller banks not included in the 2016 EU-wide stress test will be tested by their relevant competent authorities,” the EBA said.
It marks the first Europe-wide stress-test since 2014 and comes as European banks face pressures from non-performing loans, stagnant economic growth and negative interest rates.
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