On October 7, the European Central Bank (ECB) published the results of the 2019 supervisory stress test. The sensitivity analysis focused solely on the potential impact of idiosyncratic liquidity shocks on individual banks.
The ECB concludes that the vast majority of the banks has an overall comfortable liquidity position: about half of the banks that took part in the exercise reported a “survival period” of more than six months under an adverse shock (the number of days a bank can continue to operate using available cash and collateral without access to funding markets).
Reuters draws the opposite conclusion: half of the banks will not survive a six-month cash drought. Some vulnerabilities were identified by the ECB: e.g. banks may underestimate the negative impact on liquidity resulting from a credit rating downgrade.