The role of country factors in the 2018 EBA stress test

Benedetta Bianchi ()

No 1/FS/19, Financial Stability Notes from Central Bank of Ireland

Abstract: This note looks at the role of country factors in the 2018 EBA stress test. This is a European exercise but its severity varies between jurisdictions. We show that two thirds of the cross-country variation in the key variables of the adverse scenario are explained by country factors. This suggests that - although the severity of the headline stress scenario varies across countries - the overarching approach to the calibration of the stress is consistent across countries. Moreover, we show that the adjustments made to the original calibration increase the extent to which the shocks map to these country factors.

Date: 2019-02
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