2011 European Bank Data Stress Test

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This data is based on information found on the European Banking Authority website (http://www.eba.europa.eu/risk-analysis-and-data/eu-wide-stress-testing/2011/results).

 

Since there were no defaults in 2011 (as seen in Example 3), we decided to stress test using the data to see how shocks to the financial system could lead to a ripple effect of defaults. 

 

One stress test that we implemented was a drop in each bank's cash flows by 3%. This scenario caused ten banks in the system to default.  The defaulting banks are from many different countries across Europe including Germany, Spain, France, UK, Greece, Italy, and the Netherlands.  This stress test illustrates how a small change in a strongly interconnected system can cause a catastrophic event in the European Union economy, suggesting that each bank is reliant on the others in a critical manner.

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Information on the defaulting banks in this scenario can be found below, which again, was consistent across all three algorithms. Note that all numbers are in millions of Euros.

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We also conducted several other stress tests.  Below is a summary of these stress tests.

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