What happens if a Bank goes insolvent?

Customer funds regardless if an EU bank goes insolvent are guaranteed (up to EUR 100,000 per depositor) under provisions outlined by European Union regulation.

The EBA Stress Test and Why it is Important

Since the 2008 banking crises regulators around the world have been under increasing pressure to ensure that customers are protected from serious financial shocks. History has demonstrated, on more than one occasion, that no financial system is bulletproof!

Since 2010 the EU has applied stress testing to try to countermeasure financial shocks. The stress test is an EBA-built framework that helps national supervisors (like the ACPR), banks and other financial institutions annually assess and test resilience against financial shocks or fluctuations. Why is this important? Simply put, a financially stable bank is key to ensuring trust in the financial system for everyday users and borrowers.

Extract of the EBA 2023 Stress test scenario:

...The adverse scenario is based on a narrative of hypothetical heightened geopolitical tensions, with high inflation and higher interest rates having strong adverse effects on private consumption and investments, both domestically and globally. Regarding GDP decline, the 2023 adverse scenario is the most severe used in the EU-wide stress up to now. The severe nature of the adverse scenario reflects a deliberate choice and reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macro-environment. The EBA expects to publish the results of the exercise at the end of July 2023.

Source: https://www.eba.europa.eu/risk-analysis-and-data/eu-wide-stress-testing

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