The EBA is mandated to foster sound and effective supervision across the EU arising from the requirements specified in Directive 2013/36/EU and more generally from its obligations under its founding regulation (Regulation (EU) No 1093/2010, the EBA Regulation).

The relevant provisions legally supporting the issuance of the revised guidelines are the provisions of Article 16 of the EBA Regulation and the relevant principles set out in Regulation (EU) No 575/2013 and Directive 2013/36/EU.

Article 16 of Regulation (EU) No 1093/2010 provides that the EBA shall, with a view to establishing consistent, efficient and effective supervisory practices within the European System of Financial Supervision (ESFS), and to ensuring the common, uniform and consistent application of Union law, issue guidelines and recommendations addressed to competent authorities or financial institutions.

Institutions are required to take a forward-looking view in their risk management, strategic planning, capital planning and liquidity planning as part of their internal capital adequacy assessment process (ICAAP) required by Article 73 of Directive 2013/36/EU. One of the tools that institutions can use to facilitate this forward-looking perspective in risk management is stress testing.