The EBA has published its 2016 EU-wide stress test which assesses the resilience of large banks (covering around 70% of the banking assets across the EU) to adverse economic developments. The stress tests will act as an aid for bank supervisors to decide on the appropriate supervisory action to be applied in respect of each bank. The EBA has announced that its 2016 focus will be on setting Pillar 2 Guidance (which banks are expected to follow) which will require banks to maintain a level of capital that can support the repair of the real economy. The EBA launched its consultation on credit institutions’ credit risk management practices and accounting for expected credit losses. The EBA is currently consulting on draft Guidelines on credit risk management practices and accounting for expected losses, to build on Basel Committee Guidance. The consultation, which seeks responses up to 26 October 2016, aims to provide competent authorities with guidance for the evaluation of the effectiveness of a credit institution’s practices and policies that affect allowance levels.