ECB to launch a geopolitical risk stress test covering 110 significant banks in 2026
In 2026, the European Central Bank (ECB) will conduct a thematic geopolitical risk stress test. Geopolitical risk is a cross-cutting factor that can affect multiple risk categories, including credit, market and liquidity risks. The stress test aims to assess banks' own risk management capabilities and their ability to effectively integrate this risk into their risk management frameworks.
The exercise, covering 110 banks directly supervised by the ECB, will follow a 'reverse' stress test approach, requiring each bank to identify a geopolitical risk scenario that could lead to a depletion of at least 300 basis point in its Common Equity Tier 1 (CET1) capital. Banks will also be asked to outline the actions they would take to mitigate such impact.
The aggregate results will be communicated in the summer of 2026.
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