Delivered end-to-end stress testing across credit, market, and operational risk for a major G-SIB — from methodology design to supervisory submission and live challenge sessions with the EBA.
The EBA's 2025 stress test required banks to model capital impact across credit, market, operational, and other risks under four macroeconomic scenarios (baseline, mild, severe, and reverse stress). For the client — a multi-risk trading and lending platform with significant ALM complexity — the scope was enormous: 240+ counterparty groups, 180+ trading positions, 12+ currencies, and interconnected risk dependencies. The internal team had delivered stress tests before, but the 2025 exercise incorporated new calibrations and ECB guidance that rendered many legacy assumptions obsolete. With a submission deadline of 8 months, the bank needed external expertise to accelerate delivery and validate methodology alignment with EBA expectations.
We took operational ownership of the stress test delivery, embedding 2–3 senior advisors full-time within the client's Risk team. We deployed the Ezelman ANCHOR™ framework — the seven-pillar protocol we use for every stress-testing starting-point, scenario design and reconciliation exercise.
T-0 balance sheet assembled from 240+ counterparties, 180+ trading positions, 12 currencies — one source of truth.
IFRS vs prudential, solo vs consolidated, COREP vs FINREP — all reconciled before scenarios hit.
NPE and IFRS 9 stages locked at T-0; SICR triggers clearly defined for downward migration through scenarios.
Consistent calibration across credit, market, operational — no siloed assumptions, no double counting.
Clear accountability: who approves the T-0, who signs the scenario translation, who defends to EBA.
Three independent challenge rounds before submission. Every material assumption stress-tested internally.
Live EBA challenge sessions answered in real time — written clarifications within 24h for every query.
The ANCHOR pillars manifested in four concrete workstreams:
Rather than wait for the client's teams to build models, we ran parallel methodology workshops — credit, market, operational, liquidity — designing stress assumptions aligned with 2025 EBA guidance. This allowed us to troubleshoot methodologies 8 weeks ahead of client delivery, catching gaps early.
We designed the stress test "engine" — a unified framework that aggregated credit, market, and operational shocks, reconciled exposures across GL and BCBS 239 reporting, and produced auditable results. Every calculation was traceable to source data and assumption documentation.
We calibrated stress scenarios based on EBA guidance and recent peer submissions, mapping macroeconomic drivers to balance sheet impacts. For each scenario, we modelled credit losses, market repricing, operational loss event frequency, and liquidity coverage impacts.
Monthly validation reviews ensured methodology robustness. We prepared the bank for EBA challenge sessions by running live Q&A simulations, stress-testing the client's answers against likely supervisor questions.
Probability of Default (PD) and Loss Given Default (LGD) shocks across all portfolios (corporate, retail, SME, mortgage). We modelled the relationship between economic cycles and credit losses, incorporating reverse stress scenarios to test extreme-but-plausible credit deterioration. Credit loss output: EUR 2.8B under severe stress. Validation: Peer benchmarking showed results 8% above sector median — appropriate given the client's risk profile.
Interest rate repricing, FX volatility, equity decline, and credit spread widening across the trading book. We implemented delta-weighted VaR calculations and stressed the client's hedging effectiveness under extreme market moves. Key finding: ALM hedges held up under severe stress, but FX exposures required tactical rebalancing under the reverse stress scenario. Market risk output: EUR 480M VAR impact under severe stress.
Modelled operational loss event frequency and severity under stress, calibrated to the client's historical loss data and peer benchmarks. We incorporated conduct-risk scenarios (fines, remediation costs) aligned with regulatory trends. Operational risk output: EUR 120M under severe stress (at 95th percentile of loss distribution).
We modelled funding gap evolution across scenarios, stress-testing deposit stability, secured funding access, and contingency funding triggers. Results informed the client's Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) disclosures to the EBA.
End-to-end stress test engine with credit, market, operational, and liquidity modules. Fully auditable, with documented assumptions and data lineage.
Four detailed macroeconomic scenarios (baseline, mild, severe, reverse) with supporting documentation of assumptions, peer benchmarks, and ECB alignment.
160-page technical document describing stress methodology, calibration rationale, model assumptions, and validation results. Pre-packaged for EBA submission.
Fully compliant EBA submission file (COREP format) with results across all scenarios and risk types. 15+ sensitivity analyses and reverse stress outputs.
Briefing documents and Q&A preparation for live EBA challenge sessions. Coached senior management on methodology explanations and assumption defences.
12-month plan for stress test capability improvement, including data quality upgrades and model enhancements for next cycle.
The stress test was delivered on time and exceeded supervisory expectations: