Euro Area: Publication of Financial Sector Assessment Program Documentation-Technical Note on Stress Testing the Banking Sector
IMF Staff Country Reports, July 25, 2025
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- Euro Area: Publication of Financial Sector Assessment Program Documentation-Technical Note on Stress Testing the Banking Sector
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Bibliographic details
- Published: July 25, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229018166.002
Overview and scope
- This technical note (TN) focuses on the euro area (EA) banking sector and its resilience amid successive shocks over recent years.
- Publication date: July 25, 2025.
- Pages: 138
- Volume: 2025
- Issue: 210
- Series: Country Report No. 2025/210
- DOI: https://doi.org/10.5089/9798229018166.002
- Stock No: 1EUREA2025007
- ISBN: 9798229018166
- ISSN: 1934-7685
Key findings on sector performance and risks
- Resilience fundamentals:
- Strong starting capital positions.
- Ample liquidity.
- Diversified deposit base.
- Recent outcomes:
- Capital ratios and liquidity cushions have edged higher.
- Non-performing loans continued to decline.
- Profitability rose to post-global-financial-crisis highs in 2023, buoyed by wider interest margins.
- Emerging signs of stress:
- Profitability retreated in late 2024 as asset-quality indicators began to soften.
- Large cross-border groups display thinner capital and liquidity buffers and lower returns than mid-sized domestic peers, reflecting structural differences in business models.
- Interpretation:
- Recent trends signal both the rewards of prudent balance sheet management in good times and latent pressures that could resurface should macro-financial conditions deteriorate.
Stress-testing focus areas and methodologies (as highlighted)
- Liquidity and funding:
- Cash flow liquidity stress tests.
- Liquidity requirements and liquidity risk analysis.
- Solvency and interactions:
- I. solvency stress test results.
- Solvency-liquidity interaction assessments.
- Credit and household vulnerability:
- Credit stress testing and household vulnerability assessment.
- Other analytical elements:
- Net fee analysis.
- Emphasis on cross-border group vulnerabilities versus domestic peers.
Subject classification and keywords
- Subject: Asset and liability management, Credit, Financial regulation and supervision, Financial sector policy and analysis, Liquidity, Liquidity requirements, Liquidity risk, Money, Stress testing
- Keywords: cash flow liquidity stress tests, Credit, Europe, Global, household vulnerability assessment, I. solvency stress test Results, Liquidity, Liquidity requirements, Liquidity risk, net fee, solvency-liquidity interaction, Stress testing
International Monetary Fund. Monetary and Capital Markets Department "Euro Area: Publication of Financial Sector Assessment Program Documentation-Technical Note on Stress Testing the Banking Sector", IMF Staff Country Reports 2025, 210 (2025).
Content in this bundle
- Executive Summary