Claudia Buch: Hearing of the Committee on Economic and Monetary Affairs of the European Parliament

Introductory statement by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 13 October 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you very much for the invitation to exchange views with you today. I would like to provide an update on the state of the European banking sector and on our supervisory priorities.

European banks are operating in a challenging environment. Maintaining their resilience and ability to support the real economy requires a strong institutional framework and forward-looking risk assessments.

Stress tests are a key tool in this regard. The results of this year's exercise provide insights into European banking sector's resilience to an adverse macroeconomic shock. They show higher losses, but a better ability to absorb these losses, compared with the previous stress test in 2023.

The adverse scenario assumes an aggravation of geopolitical tensions coupled with higher tariffs, resulting in higher uncertainty, lower market confidence and lower growth. In the adverse scenario, the non-performing loan (NPL) ratio would increase to 5.8%, reaching levels last seen in 2014. Currently, NPLs stand at around 2%. The aggregate losses would amount to €628 billion, which is €80 billion or 14% more than in the previous stress test.