The EBA EU-wide stress test compares selected European banks under common adverse scenarios to support supervision and market transparency.
The EBA EU-wide stress test is a coordinated exercise that estimates how selected European banks could perform under a common baseline and hypothetical adverse scenario. The European Banking Authority sets the shared methodology, templates, and disclosure framework, while participating banks and competent authorities produce and review the projections.
The exercise is a forward-looking risk assessment, not a forecast and not a guarantee that a bank will remain solvent under every possible shock.
flowchart LR
A["Common methodology and templates"] --> B["Baseline and adverse scenarios"]
B --> C["Banks project losses, income, RWA, and capital"]
C --> D["Competent-authority quality assurance"]
D --> E["Comparable disclosures and aggregate results"]
E --> F["Supervisory review and risk decisions"]
The methodology changes by exercise. A reader should use the documents for the relevant year rather than applying assumptions from an earlier test.
| Participant | Main role |
|---|---|
| European Banking Authority | Initiates and coordinates the exercise, develops common methods and templates, supports quality assurance, and publishes results |
| European Systemic Risk Board | Contributes to the adverse macro-financial scenario with other European authorities |
| European Central Bank and national competent authorities | Challenge bank submissions and use results in supervisory assessments |
| Participating banks | Apply the prescribed methodology to their data and submit projections and supporting information |
This division matters. The EBA creates comparability and coordination, but it is not the day-to-day supervisor of every bank in the sample.
An EBA exercise can project effects on:
The methodology can prescribe a static balance sheet, common scenario paths, model constraints, and limits on management actions. Those assumptions improve comparability but do not reproduce every action a bank might take in a real crisis.
Assume a participating bank starts a hypothetical test with EUR 13 billion of CET1 capital and EUR 100 billion of RWA:
Starting CET1 ratio = EUR 13 billion / EUR 100 billion = 13.0%
Under the adverse scenario, assume cumulative losses and other effects reduce CET1 capital to EUR 8.5 billion while RWA rise to EUR 110 billion:
Adverse CET1 ratio = EUR 8.5 billion / EUR 110 billion = 7.7%
The ratio declines by about 5.3 percentage points. That depletion helps compare the severity of the modeled effect, but it does not by itself establish whether the bank is safe, investable, liquid, or compliant with every applicable capital requirement. Supervisors must also consider buffers, capital composition, business model, funding, legal entities, and risks outside the scenario.
This page provides general financial and regulatory education, not a bank rating, supervisory conclusion, capital analysis, or investment recommendation.