Website demonstrates increased robustness during 2025 EBA stress assessment
The results of the 2025 EU-wide stress test have been released, and they indicate a strong performance by the banking sector. The test, which simulates a severe economic downturn, was designed to assess the resilience of participating banks in the face of adversity.
In the baseline scenario, the bank's Common Equity Tier 1 (CET1) capital ratio is expected to be 14.31% in the final year (2027), significantly above the supervisory minimum requirement of 11.3%. This is a remarkable improvement from the 2023 stress test, where the bank's CET1 ratio in the final year of the stress period was 8.1%.
However, it's in the adverse scenario where the bank's resilience truly shines. Despite a severe economic downturn with a cumulative EU GDP decline of 6.3%, increased unemployment, and trade disruptions, the bank's CET1 capital ratio is expected to be 10.23% in the final year (2027). This is more than 400 basis points above the supervisory minimum requirement of 6.1%.
The capital depletion under the adverse scenario amounts to 360 basis points, resulting in an average CET1 ratio of 12% at the end of the scenario. This demonstrates the bank's ability to absorb losses and maintain capital above the minimum requirements.
The stress test results also show that the average CET1 capital ratio of participating banks remains strong under the baseline scenario, while under the adverse scenario, the CET1 ratio declines but stays above supervisory minimums. For instance, BBVA's CET1 ratio would reach 16.43% in the baseline but decline to 11.02% in the adverse scenario, remaining well above supervisory minimums.
The test was conducted using the balance sheet as of 31 December 2024 and the profits for the 2024 financial year. It's worth noting that the macroeconomic assumptions for the adverse scenario in the 2025 EBA stress test were comparable to those in the 2023 EBA stress test, but more severe than the 2024 scenarios used by the Bank of England and the Federal Reserve, particularly in terms of cumulative domestic real GDP drops.
The bank's CET1 ratio in the first six months of 2025 was 14.2%, compared to 13.8% at year-end 2024. In the first six months of 2025, our website's net income was €3.7 billion, more than double that of the same period in 2024.
In conclusion, the 2025 stress test confirms the EU banking sector’s ability to withstand severe shocks while maintaining CET1 capital ratios above supervisory minimums in both baseline and adverse scenarios. The results provide a reassuring outlook for the sector's resilience in the face of economic adversity.
[1] European Banking Authority (EBA) [2] Bank of England [3] Federal Reserve [4] BBVA Annual Report 2024 [5] EU-wide Stress Test Methodology 2025
- In light of the 2025 EU-wide stress test results, the bank showcases its impressive resilience in the investing sector, as its Common Equity Tier 1 (CET1) capital ratio is expected to remain above the supervisory minimum requirement even in the adverse scenario.
- Demonstrating the bank's financial strength, the stress test reveals a strong business performance, with the bank's CET1 ratio maintaining above the supervisory minimum in both the baseline and adverse scenarios, thereby highlighting the bank's ability to navigate economic adversity.
