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The European Banking Authority (EBA) today published an Opinion on the interaction between the output floor and Pillar 2 Requirements (P2R) in the context of the mandate set forth in the Capital Requirements Directive (CRD). The Opinion considers that the nominal amount of P2R is not to increase as a result of an institution becoming bound by the output floor and highlights the possibility of double counting in setting the P2R of risks already covered by the effects of a binding output floor.

The European Banking Authority (EBA) today launched its 2025 EU-wide stress test and released the macroeconomic scenarios. This year’s exercise is designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. The adverse scenario is based on a narrative of hypothetical worsening of geopolitical tensions, with large, negative, and persistent trade and confidence shocks having strong adverse effects on private consumption and investments, both domestically and globally. The severe nature of the adverse scenario reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macroeconomic environment. The EBA expects to publish the results of the exercise at the beginning of August 2025.