MNI BRIEF: Stress Test Show EU Banks Resilient - ECB

The EU 2025 stress test shows that methodology used in the latest test does not capture the full range of shock transmission mechanisms and risks faced by the financial system, noting that there are pockets of vulnerability when risks not included in the current stress test are included, Vice President Luis de Guindos wrote in a blog Wednesday.

The latest stress test was published by the ECB Tuesday, and showed that European banks are resilient under the adverse scenario thanks to strong profitability and capital.

The macroprudential stress test extension report was published Wednesday, and notes that it accounts for the additional strains on the macroeconomy caused by deleveraging and derisking by banks, including a contraction in credit that would lead to an additional cumulative GDP contraction (to the one included in the adverse scenario -- by around 2 percentage points after three years.