Stress test or similar review of the European Stability Mechanism

13 October 2014
P-007839-14
Question for written answer
to the Commission
Rule 130
Alfred Sant (S&D)

Subject: Stress test or similar review of the European Stability Mechanism

Questions
1. Have any stress tests or similar reviews been conducted of the European Stability Mechanism?

2. If so, could their results be made public?

3. If not, does the Commission consider that it would be desirable to carry out such a stress test or similar review?

Answer
The Commission has not and does not currently plan to conduct any stress test or similar exercise on the European Stability Mechanism (ESM) and there is no provision that gives such competence to the Commission. Stress tests are normally conducted on institutions with portfolios that contain a large number of complex financial instruments. By contrast the European Stability Mechanism is an International Financial Institution, whose members are the euro area Member States. It has only been used to grant/conduct two financial assistance programmes to Spain and Cyprus with a total outstanding commitment of EUR 50.3 billion and as such a stress test of its equivalent sovereign loan portfolio does not seem an appropriate and meaningful exercise to conduct. Meanwhile, the paid-in capital of the ESM is invested conservatively, in highly-rated, highly liquid assets only, in accordance with the investment policy established by the Board of Governors. In addition, the ESM has an early warning system in place such that it can track, identify and address in a timely manner any repayment challenges or problems stemming from the invested funds that may emerge. Also, as stipulated in Article 29 and 30 of the ESM Treaty, the ESM Board of Auditors as well as external auditors approved by the ESM Board of Governors, annually perform independent audits of the ESM.