The scenario involved three fictitious banks that engaged in cross-border activities and was aimed at testing preparedness for a potential crisis situation, including in communication, information sharing and collaboration between the authorities, all in a highly uncertain and time-pressured environment.

Nearly 450 participants were involved, representing authorities from Denmark, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden, as well as from Estonia and from the relevant EU authorities, including the European Commission and the European Central Bank (ECB).

A representative of the International Monetary Fund (IMF) was also invited to take part as an observer.

The exercise was designed in line with a crisis scenario where the fictitious banks went through three phases that could be foreseen in a bank crisis management process: 1) the transition from normal business to recovery including addressing liquidity issues,; 2) the movement from recovery to resolution, with resolution authorities assuming control of the bank, and 3) after resolution, the return of the restructured bank to the markets.

During the exercise, authorities applied the tools and powers at their disposal according to the EU regulatory framework for banking supervision and crisis management, the central bank says.

The lessons drawn will be integrated into participating authorities' existing crisis management routines in order to strengthen their crisis preparedness and further enhance the crisis management framework in the Nordic-Baltic region, the Bank of Estonia said.

A preparation team established under the Nordic Baltic Stability Group (NBSG) and led by the Danish resolution entity Finansiel Stabilitet was formed in 2023 to prepare the exercise, and advised by Oliver Wyman in the preparation of the exercise.

The NBSG consists of government ministries, central banks, supervisory authorities, and resolution authorities in the eight Nordic and Baltic countries. The Nordic and Baltic authorities have agreed to conduct regular financial crisis simulation exercises in future, within the NBSG framework.

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