ECB to test European lenders’ resilience to bank runs

EPA/JULIEN WARNAND

A file photo dated 27 February 2012 showing workers removing the Dexia bank logo from the building headquarter in Brussels after the Belgian part of the bank was nationalised. Dexia, then a Franco-Belgian bank, required a government bailout in 2011 and in the aftermath the Dexia Bank Belgium bank name was later changed to 'Belfius Bank & Insurance'.

ECB to test European lenders’ resilience to bank runs


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The European Single Supervisory Mechanism will subject 100 systemic lenders to “extreme hypothetical shocks” over the course of the next four months.

The new stress tests introduced will test the resilience of lenders to bank runs, calculating the number of days that a bank can continue to operate using available cash and collateral with no access to funding markets, according to a European Central Bank statement.

The “extreme shock” tests emulate the Single Supervisory Mechanism experience since 2014. The tests will assume a major run on deposits, a freeze in wholesale funding, a three-notch downgrade to its credit rating, and pronounced withdrawals in committed credit lines over a period of six months, with the results published in the second half of 2019.

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