The website exhibited increased robustness in the 2025 European Banking Authority stress test.
EU-wide Stress Test Results for 2025 Show Improved Bank Capitalisation
The European Banking Authority (EBA) has released the results of the 2025 EU-wide stress test, revealing improved bank capital ratios and lower depletion under stress compared to the 2023 test. These findings suggest a stronger bank capitalisation and earnings capacity, despite a more challenging economic scenario.
In the adverse scenario for 2025, the Common Equity Tier 1 (CET1) Ratio decreases to 12%, a capital depletion of 370 basis points (bps), which is lower than the 479bps depletion seen in 2023. This improved resilience is attributed to stronger income generation offsetting losses, and higher starting capital ratios (around 15.9% aggregate) compared to 2023 (about 15.2%).
The 2025 stress test scenario covers a harsher macro-financial downturn, including geopolitical tensions and trade fragmentation. Despite these challenges, banks demonstrated better absorption capacity and profitability, improving outcomes compared to the 2023 exercise.
Key comparison points between the 2025 and 2023 stress tests reveal that the starting capital ratios were higher in 2025, providing a better cushion (15.9% vs. 15.2%). The capital depletion under adverse stress was smaller in 2025 (370bps vs. 479bps).
Individual bank examples, such as ING and BBVA, also confirm strong resilience in 2025. ING's actual CET1 ratio mid-2025 was 13.3%, aligning with the stress test showing strong capital positions. BBVA’s fully loaded CET1 ratio under the adverse scenario would be 11.02% in December 2027, with a capital loss of 186bps, well below average for comparable banks.
Looking ahead to 2027, the adverse scenario shows an increase in the CET1 Ratio to 9.43%, with higher supervisory minimum requirements compared to the baseline scenario for the same year.
It is important to note that the article mentions a potential three-year recession from year-end 2025 through 2026, with economic consequences for Germany such as a 5.0 percentage point increase in the unemployment rate, a 7.5% cumulative three-year decline in Gross Domestic Product, and declines in real estate prices by 13% (residential) and 33% (commercial) over the three-year stress period. However, these facts are not explicitly stated in the table provided.
For more detailed information on these ratios, please visit the EBA's website. The results of the 2025 EU-wide stress test provide reassurance about the sustained resilience of EU banks over the period from 2023 to 2025.
Investors may find the improved bank capitalisation following the EU-wide stress test in 2025 as a promising sign, indicating a stronger business environment for investments in the financial sector. Additionally, the demonstrated ability of banks to absorb economic challenges and maintain profitability suggests a more robust business landscape for various industries, as banks play a vital role in funding and supporting businesses.
