On 15 September 2019, the European Banking Authority (EBA) issued revised guidelines on stress tests for deposit guarantee schemes. The guidelines require deposit guarantee schemes in the European Economic Area to test comprehensively their ability to perform their statutory functions, and to report the results of the tests in a harmonised manner to the EBA by 16 June 2024. Based on the results, the EBA will prepare a peer review in 2025.
The tests described in the guidelines cover all statutory functions of a deposit guarantee scheme, i.e. the payout of deposit guarantee compensations to the depositors of domestic banks and branches, funding of the transfer of the deposit portfolio and utilisation of deposit guarantee assets to fund the resolution.
As part of ensuring the operational capability of the deposit guarantee scheme, regular tests must also be carried out to ensure that domestic deposit banks are able to report the information required for the payment of compensations to the deposit guarantee scheme in the agreed format and schedule.
Based on the tests results, the EBA will prepare a peer review in 2025
The purpose of the tests is to ensure that deposit guarantee schemes are able to perform all of their statutory tasks. At the same time, the EBA guidelines seek to ensure that the tests carried out in each country are consistent with high quality and uniform principles, so that their results can be used to reliably assess the operational capability as well as the adequacy of and access to funding of the deposit guarantee scheme in each country.
The EBA will prepare and publish a peer review of tests made under the new guidelines in 2025. The previous peer review was made in 2020. The deposit guarantee schemes must remediate any shortcomings in their operation and performance identified in the tests. Therefore, testing plays an important role in ensuring credible and operable deposit guarantee for the entire EU area.
The Financial Stability Authority (FFSA) has conducted regular testing of the deposit guarantee scheme in cooperation with deposit banks since 2017 in accordance with the EBA’s previous guidance. The Authority has also been closely involved in the preparation of the revised EBA guidance and is currently making a multi-year testing plan based on the new guidelines for the FFSA’s internal use. In addition to the tests based on the EBA guidelines, the FFSA will also continue to test domestic banks’ preparedness for the submission of data as part of the extensive stress testing framework concerning deposit guarantee.
Further information:
EBA Guidelines on stress tests of deposit guarantee schemes
FFSA Deposit Guarantee Expert Anna Kanninen (firstname.surname(at)rvv.fi)
