The newly-established European Banking Authority, created in the wake of the financial crisis, will also be put to test as it oversees the exercise for the first time since it was set up in January 2011.
The last stress exercise in 2010 was heavily criticised for not testing banks against adverse scenarios like sovereign defaults. The tests also let banks which have since suffered huge losses, like Allied Irish Banks and the Bank of Ireland, slip through the net.
To add to market doubts over their toughness, German banks stood accused of hiding their exposure to sovereign debt.
EBA Chairman Andrea Enria gave assurances that this year's tests would be much tougher and that the new authority's own credibility depended in part on a successful outcome.
A spokesperson for the EBA reiterated Enria's message yesterday (3 March). 'There will be more disclosure of the key steps […] and there will be a vigorous peer review,' the body's spokesperson said at a briefing.
According to the EBA, today's tests will follow two main scenarios, a baseline macro-economic test and a more adverse picture.
Though the authority has held back publication of the list of banks to be tested until 18 March, it revealed that the exercise will test banks against tougher scenarios than last year. These include substantial movements in property, interest rate and sovereign debt prices. It will also check "country-specific shocks on real estate prices, interest rates and sovereigns".
"The stress test, which will be conducted on a large number of European banks, involves a series of detailed technical steps and, as a consequence, will take several months to run," the EBA said in a statement.
The EBA, which began its operations in January, has the authority to give legally-binding orders to national supervisors and companies.
This stress test will also be a test of the body's ability to inject confidence back into a sector that is being propped up by government support.
