## 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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**Canonical URL:** [Euro Area: Publication of Financial Sector Assessment Program Documentation-Technical Note on Stress Testing the Banking Sector](https://www.imf.org/en/publications/cr/issues/2025/07/25/euro-area-publication-of-financial-sector-assessment-program-documentation-technical-note-568945)

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## Bibliographic details
- Published: July 25, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229018166.002

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### 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)._

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_Source: https://www.imf.org/en/publications/cr/issues/2025/07/25/euro-area-publication-of-financial-sector-assessment-program-documentation-technical-note-568945_