The stress test scenario is based on an increase in “geopolitical tensions”.
The European Banking Authority (EBA) and the ECB launched their stress tests of European banks on Monday in order to assess the capacity of large banking groups to cope with large-scale shocks, through a scenario based on an increase in “geopolitical tensions”.
The exercise is “designed to provide valuable information to assess the resilience of the European banking sector in the current, uncertain and changing macroeconomic environment,” the Authority said in a press release.
These stress tests – carried out every two years – also aim to verify that the level of banks’ capital is “sufficient to enable them to support the economy in periods of tension”.
The EBA based its 2025 scenario on the hypothesis of “worsening geopolitical tensions” having “negative effects on consumption and investments, both nationally and globally”.
In the scenario adopted by the EBA, the institution projects in particular a drop in the GDP of the European Union of 6.3% by 2027 compared to current forecasts, inflation at 5% in 2025 and rising unemployment. by 5.8 points compared to 2024.
The 2025 exercise covers 64 banks, including 51 from the euro zone, with at least 30 billion euros in assets and representing in total around 75% of the total assets of banks in the European Union, according to the ABE.
-For banks that are smaller and therefore excluded from the sample taken into account by the EBA, the European Central Bank (ECB) will carry out its own stress test. The latter will concern 45 banks.
The results of the two exercises should be known in early August 2025.
If the ECB specifies that these tests are not binary (“pass or fail”), the institution warns that it has noticed “too optimistic projections” in the past, and that it will put in place measures to “discourage” projections that it considers “imprudent”.
The last ABE stress test was launched in 2023. At the time, the results of the test made it possible to “confirm the resilience of the French banking system”, indicated the Prudential Control and Resolution Authority (ACPR). ), French banking and insurance policeman.
French banks, however, had less success in the exercise than their EU counterparts.
