The European Banking Authority has published its 2025 market and credit risk benchmarking reports, finding further improvements in the consistency and comparability of EU banks’ internal models used for capital requirements, while pointing to areas that still warrant supervisory attention as major regulatory reforms move closer to full implementation. In market risk, the results show more stable outcomes and better data quality. In credit risk, the overall picture remained stable, with a longer-term reduction in probability of default variability across several asset classes. For market risk, the Internal Model Approach assessment covered 43 EU banks in 13 jurisdictions and showed improved Initial Market Valuation data quality and historically low variability in Value-at-Risk, although dispersion remained higher for stressed Value-at-Risk and the Incremental Risk Charge. The Alternative Standardised Approach continued to show stronger convergence, with Sensitivities-Based Method dispersion falling to an average of 8%, but methodological issues persisted in foreign exchange translation and equity sector mapping, and seven banks were flagged for further supervisory review. For credit risk, the share of Exposure at Default under the Internal Ratings Based approach continued to decline gradually, while an increase in approved material model changes across asset classes pointed to progress in implementing the IRB roadmap. Over 2015 to 2024, probability of default variability fell across several asset classes and loss given default variability was broadly stable with a slight downward trend. The EBA said differences in long-run default rates explain part of probability of default variation, while differences in collateralisation, captured by loan-to-value ratios, explain only part of the remaining loss given default variability.
European Banking Authority2026-06-18
European Banking Authority publishes 2025 benchmarking reports showing lower model dispersion and seven banks flagged under ASA
The European Banking Authority’s 2025 benchmarking reports show further improvement in the consistency of EU banks’ market and credit risk models used for capital requirements. Market risk results showed lower dispersion overall, with Sensitivities-Based Method dispersion under ASA falling to 8%, although seven banks were flagged for supervisory review. Credit risk outcomes remained stable, with probability of default variability declining over time and signs of continued progress in IRB model reform.