European Banking Authority peer review finds only five of seven deposit guarantee schemes largely meet core stress test expectations

The European Banking Authority published a peer review of how seven national deposit guarantee schemes (DGSs) conduct stress tests against benchmarks derived from the Deposit Guarantee Schemes Directive and the revised EBA Guidelines on stress tests of DGSs. The review concludes that stress testing programmes are generally in place and aligned with EBA expectations, but identifies gaps in how consistently DGSs evidence completion and use of key stress testing elements. All seven DGSs were assessed as having developed stress testing programmes broadly in line with the guidelines, with only minor shortcomings, and as cooperating effectively with relevant authorities, including robust testing of those arrangements. However, only five of the seven DGSs could fully or largely demonstrate that they had completed all mandatory core stress tests using realistic assumptions and objective evaluations, sufficiently increased scenario severity and complexity to test intervention capacity, and identified system improvements with actions taken or planned. The report also sets follow-up measures for all EU DGSs covering timely development and execution of stress tests, cooperation, scenario severity and complexity, and the identification of areas for improvement, and it includes an overview of 194 stress tests conducted by DGSs in the EU, Norway and Liechtenstein during 2021–2024. A follow-up peer review of implementation of the report’s measures is planned in two years.