European Banking Authority publishes 2025 EU-wide stress test results showing 12% CET1 under adverse scenario despite EUR 547bn losses

The European Banking Authority (EBA) published the results of its 2025 EU-wide stress test covering 64 banks across 17 EU and EEA countries, representing 75% of EU banking sector assets. Under a severe three-year hypothetical downturn driven by a deteriorating global macro-financial environment, renewed geopolitical tensions, trade fragmentation and persistent supply shocks, banks would incur total credit, market and operational risk losses of EUR 547bn while remaining capitalised. Under the adverse scenario, aggregate Common Equity Tier 1 (CET1) capital depletion is 370 basis points, leaving a CET1 ratio of 12% at the end of the horizon on a transitional basis. Strong income generation partly offsets losses and results in lower depletion than in the 2023 exercise, even as banks show higher nominal losses reflecting greater risk sensitivity; credit and market risk are the main contributors to losses, and the EBA notes improved sectoral differentiation in modelling but a continuing need to strengthen modelling practices. The EBA published detailed bank-level starting points and projections under both baseline and adverse scenarios and reiterated that the EU-wide stress test has no predefined pass or fail threshold. The results will feed Pillar 2 supervisory assessment and support Competent Authorities’ Supervisory Review and Evaluation Process discussions with banks on capital adequacy and distribution plans, with outcomes reported on both CRR3 transitional CET1 ratios and, for completeness, fully loaded ratios.