The European Banking Authority (EBA) has announced the final methodology, draft templates, and template guidance for the EU-wide stress test exercise scheduled for 2025. This stress test will commence in January 2025, following the release of macroeconomic scenarios. The results are expected to be published in early August 2025.

The upcoming stress tests will involve 68 banks as outlined in Annex 1 of the methodology note. A constrained bottom-up approach is adopted, with some top-down elements included. The exercise assumes balance sheets remain constant and aims to assess how adverse shocks affect banks' solvency.

Key focus areas include credit, market, counterparty, and operational risks. Market risk methodology relies on stressed market parameters derived from macroeconomic scenarios. Credit risk methodology prescribes increases in risk exposure for securitization exposures and shocks to credit risk losses for sovereign exposures. Banks will project impacts on net interest income and net fee and commission income over a three-year period from 2025 to 2027 using year-end 2024 figures.

Minor technical adjustments may be required for the draft templates before their final publication at launch. Reporting starting points must align with the regulatory framework effective December 31, 2024. This includes decisions by competent authorities regarding CRR/CRD applicable before January 01, 2025.

For projections covering the period from December 31, 2024 through to December 31, 2027, banks should apply CRR3/CRD6 rules along with any pre-announced decisions by competent authorities that take effect on or after January 01, 2025. Buffer rates during this period must reflect all such decisions announced prior to December 31, 2024.

New internal models or modifications of existing ones are mandatory if approved by competent authorities and implemented by December 31, 2024.

Coordination of this exercise involves collaboration between EBA and other key bodies including the European Central Bank (ECB), European Systemic Risk Board (ESRB), and national Competent Authorities across relevant jurisdictions.

Banks are required to submit initial results by late April 2025 followed by a second submission in early June and a final submission in early July ahead of result publication approximately one month later.