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Ensuring a common pan-EU approach

to banking supervision

As the agency tasked with ensuring the safety and effi-

ciency of the EU banking sector, the EBA also has an im-

portant role in promoting pan-EU convergence of bank-

ing supervisory practices. Creating a common EU culture

of banking supervision is vital to ensure that the single

rulebook is applied consistently by EU banking super-

visors, reinforcing the efficiency of the EU single market.

In order to promote supervisory convergence, the EBA

develops regulatory standards which define supervisory

methodologies, as well as the functioning of colleges

of supervisors (for those banks which operate on a

cross-border basis). The EBA has also laid the foun-

dations for the functioning of colleges that facilitate the

reaching of joint decisions in approving internal models

used by institutions across Member States. The com-

mon framework proposed by the EBA for the Union’s

supervisory review and evaluation process (SREP) pro-

vides a common approach for assessing funding plans

across the EU. These regulatory standards represent

major progress in establishing consistent supervisory

practices across the single market and in strengthen-

ing the basis and functioning of cross-border supervi-

sion in colleges. They form the so-called single super-

visory handbook.

Monitoring the health of EU banks:

the stress test

Given its technical expertise on banking, the EBA is also

tasked with the assessment of potential risks and vul-

nerabilities in the EU banking sector. In particular, the

authority has a prominent role in the EU-wide stress

test exercise. This is a major risk assessment tool that

examines the resilience of financial institutions with re-

gard to adverse market developments, as well as any

systemic risks in the EU financial system overall.

The EBA initiates and coordinates stress tests in the EU.

In cooperation with the ESRB, the ECB and the Com-

mission, the EBA defines for each edition of the stress

test a common pan-EU methodology which specifically

allows for the testing of the resilience of banks in case

of plausible financial crisis scenarios at a given time

and the identification of structural weaknesses in the

EU banking sector. The EBA’s EU-wide stress tests are

conducted in a bottom-up fashion, using consistent

methodologies, scenarios and key assumptions devel-

oped in cooperation with the ESRB, the ECB and the

Commission. The main objective in conducting an EU

stress test in the banking sector is to provide a clear

and transparent picture of how well EU banks are capi-

talised and whether they are likely to withstand financial