AFME welcomes start of 2023 EU-wide stress test

The Association for Financial Markets in Europe, AFME, welcomes the start of the 2023 EU-wide stress test by the EBA (eventid=19526).
+ AFME observes that larger entities of third country banks are now included in the wider sample, which will help to understand the similarities and differences between different countries for both banks and supervisors.
Going forward, greater global synchronisation is needed to harmonise banking regulations and reduce the associated operational burdens.
+ AFME welcomes the recognition by the EBA and ESRB of the impact of interest rate developments in different countries on banks‘ risk profiles and returns.
AFME warns against unintentionally upsetting investors by reporting losses under this methodology higher than the banks‘ actual losses would be, given their business style.
+ Under the baseline scenario for the euro area, the UK and the US, and the bad scenario, which is around the 3% mark, inflation is expected to play an important role in the functioning of the global economy in the coming years, returning to target inflation levels by the end of 2025. It is therefore unlikely to have a major impact.
+ AFME points out that sufficient quality assurance is needed for supervisory stress tests to be successful. The (national) competent authorities are responsible for this, and supervisors are encouraged by AFME to have informed discussions.
The identification of idiosyncratic features in the results and cross-sectional benchmarking need to be carefully balanced.