ECB finds gaps in geopolitical stress-testing frameworks
Current methods fail to properly capture impact of geopolitical stress on liquidity
The European Central Bank’s first ever geopolitical reverse stress test has sparked a debate over whether eurozone lenders are correctly modelling liquidity and funding risks.
“The reverse stress test revealed that solvency-liquidity interactions generally are not well-captured in many banks’ stress-testing frameworks. This is an area where further improvements are needed,” the ECB wrote in a July 31 report setting out the results of the exercise.
At the end of 2025, the ECB’s single supervisory
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: www.centralbanking.com/subscriptions
You are currently unable to print this content. Please contact info@centralbanking.com to find out more.
You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@centralbanking.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@centralbanking.com
More on Regulation
The ECB’s geopolitical stress test needs a price
Only a market can say how much it should cost to insure against losses from a geopolitical risk event, and none exists, argues academic
BoE backs away from mandatory gilt clearing
Discussions with industry shift to portfolio-based repo haircuts and ways to encourage voluntary clearing
US agencies propose crypto rules after Clarity Act stalls
SEC plans would exempt firms from some securities laws
Central Bank of Brazil delays crypto transfers to fight fraud
Latin America’s largest economy targets stablecoins after Trump’s tariffs against Pix
Banks urge Singapore to relax exposure limit on crypto assets
Lower capital for tokenisation and stablecoins welcomed, but cap will curb bank involvement for now
IMF’s Katz urges central banks not to wait for ‘perfect’ stablecoin regs
Deputy head stresses data collection should start now as AI may accelerate adoption
BoE’s leverage ratio rejig to hit HSBC and StanChart
Proposed changes aim to rebalance scales in favour of domestic lending
Peirce warns crypto vaults and lending may fall under SEC rules
Commissioner urges against legal ‘gymnastics’ to avoid regulation