By the European Banking Authority
- The results of the 2023 EU-wide stress test show that European banks remain resilient under an adverse scenario which combines a severe EU and global recession, increasing interest rates and higher credit spreads.
- This resilience of EU banks partly reflects a solid capital position at the start of the exercise, with an average fully-loaded CET1 ratio of 15% which allows banks to withstand the capital depletion under the adverse scenario.
- The capital depletion under the adverse stress test scenario is 459 bps, resulting in a fully loaded CET1 ratio at the end of the scenario of 10.4%. Higher earnings and better asset quality at the beginning of the 2023 both help moderate capital depletion under the adverse scenario.
- Despite combined losses of EUR 496bn, EU banks remain sufficiently capitalised to continue to support the economy also in times of severe stress.
- The high current level of macroeconomic uncertainty shows however the importance of remaining vigilant and that both supervisors and banks should be prepared for a possible worsening of economic conditions.
Link: EBA publishes the results of its 2023 EU-wide stress test