The European Banking Authority (EBA) released the final methodology, draft templates, and template guidance for the EU-wide stress test exercise for 2025. The stress test exercise will formally start in January 2025, following the release of the macroeconomic scenarios, with the results scheduled for publication in early August 2025. The 2025 exercise will cover 68 banks listed in Annex 1 of the methodology note.
The EU-wide stress tests for 2025 adopt a constrained bottom-up approach, incorporating some top-down elements as well. Balance sheets are assumed to remain constant, with the primary focus being the evaluation of the impact of adverse shocks on banks’ solvency. The exercise will include baseline and adverse scenarios, focusing on common risk factors such as credit, market, counterparty, and operational risks. The application of the market risk methodology is based on a common set of stressed market parameters, calibrated from the macroeconomic scenario. The credit risk methodology includes a prescribed increase in risk exposure amount for securitization exposures as well as prescribed shocks to credit risk losses for sovereign exposures. Banks will also project how these scenarios will affect key income streams, including net interest income and net fee and commission income. The exercise is carried out on the basis of year-end 2024 figures, and the scenarios will be applied over a period of three years from 2025 to 2027. The exercise is run at the highest level of consolidation.
The draft stress test templates and guidance might need some minor technical adjustments before their final publication at the launch. Banks shall consider the regulatory framework that was brought into force and is applicable as of December 31, 2024 when reporting starting points as of end-2024. This includes decisions taken by competent authorities regarding the application of the CRR/CRD that were applicable before January 01, 2025. For the restated figures as of December 31, 2024 and for the projections over 2025-2027, banks shall apply CRR3/CRD6, including decisions taken by competent authorities regarding its application announced prior to the cut-off date of the exercise (December 31, 2024) that enter into force as of January 01, 2025. Buffer rates applicable over the horizon must reflect all decisions announced by competent authorities prior to the cut-off date of the exercise (December 31, 2024). The use of new internal models and modifications of existing internal models is mandatory as long as these are approved by the competent authority and effectively implemented by December 31, 2024.
The exercise is coordinated by the EBA in cooperation with the European Central Bank, the European Systemic Risk Board, and the Competent Authorities from all relevant national jurisdictions. The first submission of results to the EBA is scheduled for end of April 2025, second submission in early June 2025, and the final submission will be in early July 2025, followed by the publication of results nearly a month later.
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