European Central Bank Banking Supervision asks banks to design geopolitical stress scenarios that deplete capital by 300 basis points

In an interview with Naftemporiki, Claudia Buch, Chair of the Supervisory Board of the European Central Bank (ECB), set out ECB Banking Supervision’s focus on strengthening banks’ resilience to heightened geopolitical risks and on reinforcing common prudential “guardrails”, noting the Basel Committee’s expectation of full and consistent implementation of the Basel III framework by all member jurisdictions as soon as possible. She also linked financial stability and competitiveness to deeper Single Market integration, arguing that the savings and investments union should reduce fragmentation through greater harmonisation of national rules and that the banking union remains incomplete without European deposit insurance. On supervision, Buch highlighted a shift in the ECB’s geopolitical risk stress-testing approach: after last year’s EU-wide stress test used a common adverse scenario and indicated that the sector was profitable with capital buffers to absorb higher losses, this year’s exercise asks banks to define the scenario that could lead to a 300 basis point capital depletion, to provide insights into risk management, scenario planning and preparedness. She flagged that euro area non-performing loans fell from around 8% in 2014 to around 2% in late 2025, but warned that weaker growth, higher energy prices, higher tariffs and reduced fiscal space could reverse the trend, and pointed to ongoing ECB work on underwriting standards as an early-warning lens; on Greece, she said banks have materially strengthened profitability, capital and asset quality and cut non-performing loans from 42% in 2015 to below 3%, while noting the expiry of the Hellenic Asset Protection Scheme and that most non-performing loans now sit outside the banking sector.