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A study on the EBA stress test results: influence of bank-, portfolio-, and country-level characteristics

Author

Listed:
  • J. Hernández

    (Banco de España)

  • J. Población

    (Banco de España)

  • N. Suárez

    (Universidad Autónoma de Madrid)

  • J. Tarancón

    (Banco de España)

Abstract

This paper investigates the drivers of the change in the credit risk provisions at a portfolio level for banks that have been subject of the 2018 EBA stress tests. We perform a holistic review of the drivers of the three-year projections of credit losses. We define a model containing all the macroeconomic variables considered by the EBA approach. By adding a three-dimension set of explanatory variables, entity-, banking sector- and portfolio-level aspects, we verify that the published results show a relation with these features. Our results show that although EBA variables explain most part of credit risk provisions, bank-level variables, banking sector features, and the specific characteristics of the portfolio also play a role in explaining part of the provisions. The results also indicate the existence of complementary/substitution effects of both bank- and portfolio-level variables with the characteristics of the banking sector when explaining credit risk provisions.

Suggested Citation

  • J. Hernández & J. Población & N. Suárez & J. Tarancón, 2025. "A study on the EBA stress test results: influence of bank-, portfolio-, and country-level characteristics," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(3), pages 408-432, September.
    • Handle: RePEc:pal:jbkreg:v:26:y:2025:i:3:d:10.1057_s41261-024-00268-5
    DOI: 10.1057/s41261-024-00268-5
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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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