Paradoxical stress test results: Banking resilience amid rising uncertainty

Paradoxical stress test results: Banking resilience amid rising uncertainty

Stress tests

Fecha: septiembre 2025

Ángel Berges and Jesús Morales

SEFO, Spanish and International Economic & Financial Outlook, V. 14 N.º5 (September 2025)

The 2025 stress tests conducted in the U.S. and Europe produced paradoxically positive results: banks proved more resilient than in previous rounds despite tougher adverse scenarios. U.S. banks absorbed projected losses of $550 billion, but aggregate CET1 ratios only fell from 13.4% to 11.6%, a smaller drop than in recent years. Similarly, European banks faced €547 billion in hypothetical losses, yet capital depletion was just 3.7 percentage points, the smallest since 2014. The main factor behind this resilience is improved profitability, particularly higher net interest margins, which have strengthened banks’ ability to generate capital organically. These results emphasize the sector’s progress in building buffers since the financial crisis, but they also raise questions about whether the tests fully capture emerging risks. Supervisors are already preparing adjustments, including scenarios that integrate geopolitical shocks more explicitly. This paradox points to both the improved health of the banking sector and the continued need for vigilance in an era of heightened uncertainty.

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