Stress Test 2025

The European Banking Authority (EBA) has published for consultation its draft methodology, templates and guidance for the 2025 EU-wide stress test. The objective of the stress test is to provide a common analytical framework to consistently compare and assess the resilience of banks and the European banking system to shocks, as well as to challenge their capital position.

Executive summary

The EBA has published for consultation the methodology, templates and guidance for the 2025 EU-wide stress test. Based on the 2023 methodology, this new exercise incorporates the integration of the Capital Requirements Regulation (CRR3) and considers the delayed implementation of the Fundamental Review of the Trading Book (FRTB). The stress test will cover 68 banks in the EU and Norway, representing 75% of the euro area banking sector. This broader scope and the introduction of proportionality features aim to improve the efficiency, relevance and transparency of the stress test results.

The EBA plans to publish the final methodology by the end of 2024, to start the exercise in January 2025 and to publish the results by the end of July 2025.

Main content

• Credit risk. Banks must adjust capital requirements for credit risk under CRR3 and estimate credit impairment losses using statistical methods and International Financial Reporting Standards (IFRS 9) for different risk levels (S1, S2, S3), assessing the impact on profit and loss (P&L) and risk exposure with stressed parameters.
• Market Risk, Counterparty Credit Risk Losses (CCR) and Valuation Reserves. Consistency with CRR2 for market risk capital requirements is maintained, but the new CRR3 Credit Valuation Adjustment (CVA) methodology is introduced, requiring banks to estimate the full revaluation of fair value positions taking into account market risk factor shocks and the proportionality criteria in the revaluation methods.
• Net Interest Income (NII). Includes all interest-bearing and interest-paying positions, except trading and hedging positions, with specific requirements for baseline and adverse scenarios.
• Conduct Risk and Other Operational Risks. Institutions must project the impact of conduct risk and other operational risks on P&L using internal models and qualitative information. They must include capital projections for operational risk and establish minimum levels based on historical data. Restrictions are imposed to ensure consistency and appropriateness in stress scenarios, requiring justification for low projections and keeping capital requirements for operational risk constant.
• Non-interest income, expenses and capital. Projections should be limited to 2024 levels in the baseline scenario and reduced in the adverse scenario. Categories such as dividend income and administrative expenses have set growth rates or floors. A common tax rate and simplified assumptions for deferred tax assets and liabilities are applied to ensure consistency and reliability.

Download the technical note on 2025 Stress Test.