Croatian National Bank stress test shows Croatian less significant credit institutions resilient with CET1 down 58 basis points under adverse scenario

The European Central Bank and the European Banking Authority published the results of the 2025 EU-wide stress test, and the Croatian National Bank released the outcome of its own comprehensive supervisory stress test for Croatia’s less significant credit institutions. Both exercises indicate that banks can absorb sizeable losses under a severe economic downturn scenario. In the EU-wide exercise, the capital ratio falls by less than in previous stress tests over the three-year horizon, mainly reflecting stronger starting profitability driven by higher interest rates and stable asset quality, although the sustainability of higher profits remains uncertain and may differ across banks. For Croatia’s less significant credit institutions, the Croatian National Bank’s adverse scenario results show a 58 basis point decline in the Common Equity Tier 1 (CET1) capital ratio, with average resilience assessed as stronger than for EU banks, supported in part by higher initial capitalisation. The Croatian National Bank applied the European Banking Authority’s methodology in simplified form to reflect the nature and complexity of less significant institutions, while using the same scenarios as the EU-wide test. The adverse scenario is based on a hypothetical escalation of geopolitical tensions, pronounced inflationary pressures and higher market interest rates, with broad negative effects on consumption and investment in Europe and globally.