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This stress test allows supervisors to assess the resilience of EU banks over a three-year horizon under both a baseline and an adverse scenario. The adverse scenario is characterised by severe negative shocks to economic growth, higher unemployment combined with higher interest rates and credit spreads.

The EBA's Guidelines on Product Oversight and Governance establish that the EU banking sector should: ensure financial products and services are designed to meet the needs and interests of their target consumers; test products prior to their launch and monitor them; take remedial action when something has gone wrong.

The EBA ESG Pillar 3 package will help to address shortcomings of institutions' current ESG disclosures at EU level by setting mandatory and consistent disclosure requirements, including granular templates, tables and associated instructions. It will also help establish best practices at an international level.

EBA Guidelines on Product Oversight and Governance The first part sets out requirements for manufacturers of retail banking products on their internal control functions; the identification of the target market; product testing; disclosure; product monitoring, remedial actions, and distribution channels.

The 2023 EBA adverse scenario assumes a strong 6% 3-year cumulative decline of the EU gross domestic product (GDP) from the starting point, the most severe decline compared to previous stress tests. Large drops in residential and commercial real estate prices.

The guidelines set out which arrangements with third parties are to be considered as outsourcing and provide criteria for the identification of critical or important functions that have a strong impact on the financial institution's risk profile or on its internal control framework.