Macroprudential stress testing This leads me to the second point I would like to emphasise today, the advantages of taking a macroprudential perspective with stress testing. The exercises coordinated by the EBA, using the constrained bottom-up approach, are microprudential in nature. They aim to assess individual banks’ resilience to adverse financial and economic circumstances.
There is a general view that financial regulatory reform may have had certain unintended consequences, such as limitations on banks’ proprietary trading reducing the ability of Primary Dealers to hold sizeable inventories of securities, which have contributed to less liquidity in the markets. This lower level of liquidity introduces new risks that could amplify negative spillover effects in stress situations.