European Central Bank (ECB) Banking Supervision announced a 2025 stress test covering 96 directly supervised euro area banks, combining the European Banking Authority (EBA) EU-wide exercise for 51 of the largest banks with a parallel ECB-run test for 45 medium-sized banks outside the EBA sample. Results for both exercises are planned for publication in early August 2025 and will be used to update each bank’s Pillar 2 guidance within the Supervisory Review and Evaluation Process (SREP). The EU-wide test will apply EBA methodology, templates and European Systemic Risk Board scenarios, using a bottom-up approach with supervisory benchmarking across geographies and business models; the ECB’s parallel test will be aligned to the same methodology while reflecting the smaller size and lower complexity of the additional banks. The ECB will intensify its review of insufficiently prudent submissions, with additional scrutiny during quality assurance that may include on-site visits and, after the exercise, on-site inspections to identify structural weaknesses in stress testing frameworks; repeated remediation failures could lead to further escalation measures in subsequent exercises. A specific focus will be the quality of banks’ risk data aggregation and reporting, with severe shortcomings potentially requiring remediation and directly affecting SREP outcomes, including Pillar 2 requirements through scores on data aggregation capabilities. Selected banks will also be subject to an exploratory counterparty credit risk scenario analysis to assess modelling under stressed market conditions and vulnerabilities from interlinkages with non-bank financial intermediaries. The ECB stated this element has no capital implications, but it may feed into the SREP and will be published in aggregate alongside the ECB stress test results in early August 2025.
European Central Bank - Banking Supervision 2025-01-20
European Central Bank Banking Supervision launches 2025 stress test of 96 euro area banks with enhanced scrutiny and counterparty credit risk scenario analysis
The European Central Bank (ECB) Banking Supervision announced a 2025 stress test for 96 euro area banks, integrating the European Banking Authority (EBA) EU-wide exercise for 51 large banks with an ECB-run test for 45 medium-sized banks. The tests will use EBA methodology and focus on risk data aggregation and reporting, impacting Pillar 2 guidance in the Supervisory Review and Evaluation Process (SREP). An exploratory counterparty credit risk scenario analysis will also be conducted, with findings published in aggregate in August 2025.