European Banks Demonstrate Resilience in Stress Test

The European Banking Authority (EBA) has unveiled the outcomes of its most recent stress test, involving 64 banks from 17 European Union and European Economic Area (EEA) countries. The findings highlight the robustness of European banks, even in the face of a severe hypothetical economic downturn.

Key Findings of the Stress Test

According to the EBA, "The capital depletion under the adverse stress test scenario amounts to 370 bps [basis points], resulting in a CET1 ratio at the end of the scenario of 12%." The authority noted that strong income generation during the exercise enabled banks to partially offset their losses, leading to a lower depletion compared to the 2023 exercise.

Enhanced Profitability and Capital

The participating banks embarked on the exercise with higher profitability and capital levels than in recent years. The test underscored that despite increased risk sensitivity, the banks' income generation capabilities have bolstered their absorption capacity. Credit and market risks were identified as the primary contributors to the stress test losses.