BBVA shows strength in latest stress test for European banks
BBVA has stood out in the 2023 stress test of the European Banking Authority (EBA). The exercise is carried out every two years and examines the banks’ capacity to maintain minimum capital levels and own resource requirements under two scenarios: a baseline and an adverse one. In the baseline scenario BBVA would generate 326 basis points, to a maximum fully-loaded CET1 of 15.87 percent as of December 2025. In the adverse scenario, BBVA would see a capital depletion of 295 basis points, to a fully-loaded CET1 of 9.66 percent. This impact is significantly lower than the average of the European banks surveyed (459 bps). BBVA is the third bank with lowest impact among its comparable group¹.
This year’s stress test is designed to assess the resilience of the European banking sector in the current macroeconomic environment: uncertain and changing. The adverse scenario used for the test assumes hypothetical geopolitical tensions, with increased inflation and higher interest rates, with serious adverse effects on private consumption and investments, both locally and at global level. In terms of a decline of GDP, the 2023 adverse scenario is the most severe used in the test to date.
“The severe nature of the adverse scenario reflects a deliberate choice and reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macro-environment,” says the EBA on its website.
The stress test exercise covers a three-year period (2023-25) and uses each bank’s balance as of December 31, 2022, remaining static in the exercise’s time horizon. A total of 70 banks of the EU and Norway have participated in this edition, accounting for 75 percent of the assets of the banking sector.
In the adverse scenario, BBVA would have a fully-loaded CET 1 capital ratio of 9.66 percent in 2025, which represents a negative impact of 295 pbs. The result of the exercise underlines the strength of BBVA, whose capital depletion in this scenario is significantly lower than the average of surveyed banks, with 459 pbs. BBVA is the third bank, with the lowest impact among comparable peers. The bank also improves its result from the 2021 stress tests, when the adverse scenario had a negative impact of 303 pbs.