In accordance with Article 100 of the CRD IV, the Bank of Slovenia is required to conduct annual stress tests, which are part of ordinary supervisory activities. The findings of the stress tests are one of the input parameters in the annual supervisory review and evaluation process (SREP) at the individual bank or savings bank. Risks are assessed at the bank or savings bank on the basis of the SREP, and appropriate supervisory measures are issued in the event of high exposure to individual or all banking risks.
Supervisory stress testing
1. The competent authorities shall carry out as appropriate but at least annually supervisory stress tests on institutions they
supervise, to facilitate the review and evaluation process under Article 97
2. EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 to ensure that common
methodologies are used by the competent authorities when conducting annual supervisory stress tests.
Analysis of bank sensitivity to extreme macroeconomic situations
In stress tests based on various extreme theoretical scenarios, banking supervisors assess the sensitivity of banking risks and performance indicators at an individual bank for a future period of operations (generally three years). The overall final outcome of the measurement of sensitivity is expressed as a ratio to the bank’s capital adequacy. Since the outbreak of the last financial crisis, stress tests together with an asset quality review (AQR) have also become a criterion for assessing bank recapitalisation requirements.
EU-wide stress tests
Within the EU, the Committee of European Banking Supervisors (CEBS) began the practice of periodic EU-wide stress tests back in 2009, which was continued by its successor, the EBA. The tests cover selected EU banks (the most systemically important banks, among which there are no Slovenian banks), i.e. a representative part of the European banking market.