Useful in flagging key risk factors
In general, stress tests are useful in flagging key risk factors. But their effectiveness as a
forward-looking supervisory tool depends largely upon how well they are embedded in
supervisory practices. The German supervisory authorities are already engaging banks on
areas of concern identified in stress tests and incorporate stress test results in their risk profile
assessments.
In addition, the authorities could further embed liquidity stress tests, as well as
other stress tests, in their supervisory practices and make greater use of stress test results. For
instance, to ensure that supervisory interventions are taken in a timely manner, results from
stress tests could be one of the factors (or triggers) considered in the “ladder of actions”.
EU Forecast
euf:ba.18.j:99/nws-01