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, 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 directly supervised banks by the ECB, will follow a "reverse" stress test approach, requiring each bank to identify a geopolitical risk scenario that could lead to at least a 300-basis point depletion in its Common Equity Tier 1 (CET1) capital.. Banks will also be asked to outline the actions they would take to mitigate such impacts.
The aggregate results will communicated in summer 2026.
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