Geopolitical risk reverse stress test of euro area banks: 2026 SSM thematic stress test, final results

What it contains

ECB Banking Supervision concluded its 2026 thematic stress test, in which 110 significant euro area banks took part. Unlike the biennial solvency stress tests run with the European Banking Authority, it was a reverse stress test within the internal capital adequacy assessment process (ICAAP): the ECB set a level of capital depletion and each bank designed its own geopolitical scenario to reach it. For that reason its results are not comparable with those of the EU-wide tests.

The aim was to strengthen capital and recovery planning against geopolitical risks, one of the 2026-28 supervisory priorities. The depletion target was 300 basis points of the CET1 ratio, which the ECB considers conservative but not excessively severe: the median impact observed in EU banking sectors that suffered capital losses in a year over the past 15 to 20 years was about 225 to 250 basis points. Banks could not assume fiscal or other government support beyond what had already been approved.

Most banks translated the economic scenarios into risk drivers in a meaningful way and showed a good understanding of transmission channels, but the exercise left room for improvement: granularity and sensitivity of the models to the scenario, use of multiple scenarios, consistency between the narrative and the transmission channels, balance sheet projections that were at times too optimistic, realism of mitigating actions (many banks foresee similar actions that would lose effectiveness if taken at the same time) and insufficient capture of the relationship between solvency and liquidity.

Summary prepared by the Dominican Republic Risk Management Club from a reading of the original document, with the source verified on 7 October 2026. It does not replace reading the official text and is not advice.

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