Bank stress tests set for summer

The methodology for the next round of bank stress tests scheduled for July still has to be decided, although the outcome will have huge implications for the banks.

The Central Bank will conduct the stress tests during the summer as part of the EU-wide European Banking Authority stress tests. However, the EBA will use a standardised criteria for gauging further losses sitting on the banks’ balance sheets and how much additional capital is required.

The last stress tests conducted by the Central Bank in Mar 2011 — the prudential capital assessment review — was carried out by the consultancy firm Blackrock. The banks were required to raise an additional €24bn in capital following the review, which used adverse economic scenarios to estimate potential losses.