The EBA launches its 2025 EU-wide stress test

The 2025 EU-wide stress test will assess EU banks’ performance under a baseline and adverse scenario during a three-year time horizon, from 2025 to 2027.The adverse scenario assumes a hypothetical aggravation of geopolitical tensions leading to a severe decline in GDP by 6.3% cumulatively. The adverse scenario is designed to ensure a significant severity of various macro-economic and financial shocks across all EU countries and depicts a breakdown of the shocks (on real gross value added) by economic sectors.The exercise will be conducted on a sample of 64 banks, thus covering 75% of total banking assets in the EU and Norway. The European Banking Authority (EBA) today launched its 2025 EU-wide stress test and released the macroeconomic scenarios. This year’s exercise is designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. The adverse scenario is based on a narrative of hypothetical worsening of geopolitical tensions, with large, negative, and persistent trade and confidence shocks having strong adverse effects on private consumption and investments, both domestically and globally. The severe nature of the adverse scenario reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macroeconomic environment. The EBA expects to publish the results of the exercise at the beginning of August 2025.Scope of the exerciseThe stress test assesses the solvency of EU banks in a hypothetical adverse macroeconomic scenario over a three-year horizon (2025-27). The objectives of the stress test are to:assess and compare the overall resilience of EU banks to relevant severe economic shocks;assess if bank capital levels are sufficient to ensure banks can support the economy in periods of stress;foster market discipline through transparent publication of consistent, granular and comparable data at a bank-by-bank level;provide input to the Supervisory Review and Evaluation Process (SREP) conducted by competent supervisory authorities.The EU-wide stress test will be conducted on a sample of 64 banks – thereof 51 from countries which are members of the Single Supervisory Mechanism (SSM) – covering roughly 75% of total banking sector assets in the EU and Norway.Key elements of the scenariosThe adverse scenario is designed to ensure a significant severity of various macro-economic and financial shocks across all EU countries. It is based on a hypothetical severe escalation of geopolitical tensions, accompanied by increasingly inward-looking trade policies globally, that cause an increase in energy and commodity prices, disruptions in the supply chain and adverse effects on private consumption and investment coupled with a worldwide economic contraction.The worsening of economic prospects is associated with a sustained drop in EU GDP by 6.3% cumulatively, in the period 2025-2027. At the end of the horizon, unemployment in the EU is projected to be 6.1 percentage points (ppts) above its baseline level. Inflation shifts upwards to 5.0% and 3.5% respectively in 2025 and 2026, before falling back to 1.9% in 2027.As in the 2023 EU-wide stress test, this year’s scenario includes information on the growth of Gross Value Added (GVA) in 16 sectors of economic activity. Such break-down will help better assess EU banks’ performance depending on their business model and sectoral exposures.Note to the editorsThe exercise will be run at the highest level of consolidation. The scope of consolidation is the perimeter of the banking group as defined by the Capital Requirements Regulation/Capital Requirements Directive (CRR/CRD). This exercise will involve close cooperation between the EBA and the competent authorities (including the Single Supervisory Mechanism – SSM, the European Central Bank – ECB, and the European Systemic Risk Board – ESRB).The convention used in the calibration of the adverse scenario is one of “no policy change”. This means that no other monetary policy and fiscal policy reactions other than the ones considered under the baseline scenario are assumed under the adverse scenario.The baseline scenario for EU countries is based on projections from the national central banks of December 2024. The adverse scenario assumes the materialisation of the main financial stability risks that have been identified by the ESRB in the fourth quarter of 2024, including recent risks assessments done by the EBA and the ECB.The new EU banking package, which applies from 1 January 2025, is reflected in the 2025 EU-wide stress test methodology and templates, which should however continue being understood as a risk exercise, and not as an exercise that assesses the impact of regulatory changes.Detailed information about the adverse scenario can be found in the note produced by the ESRB.The EBA’s 2025 stress test methodology to be applied to the scenarios released today can be found on the EBA website.The full sample[1] of 64 banks participating in this year exercise can be found in Annex 1 of the EBA methodology. [1] In the package that was published today, the sample has been revised. The following two banks were excluded from the sample (country code of the bank in brackets): Cassa Centrale Banca – Credito Cooperativo Italiano S.p.A (IT) and Mediobanca – Banca di Credito Finanziario S.p.A (IT). These banks were provisionally included in the sample for the 2025 EU-wide stress test to offset possible exclusions of banks before the launch of the exercise. Since no changes to the sample materialised by 15 December 2025, the banks were excluded from the sample.