ECB stress test to have less impact on EU banks' capital ratios — Bloomberg

The current stress test of Europe's largest banks is expected to have less impact on capital ratios than the previous one, Bloomberg says.

The news agency reports that in 2024 eurozone lenders posted record earnings and lower costs. Thus, banks included in this year’s European Central Bank (ECB) stress test are in a better position.

The results will allow the supervisor to determine the capital ratios, which in turn affect the amount of funds available for investor payouts.

The ECB relies heavily on the staff of banks for stress tests. This approach takes some work off the regulator, but also means that the results can be manipulated. Hence, companies providing overly optimistic forecasts will be subject to additional scrutiny, the ECB says.

The so-called adverse scenario in the test involves a sharp rise in unemployment, as well as falling stock markets and real estate prices. The ECB is testing 96 banks, with final results expected in August, Bloomberg notes.