Confirmed Methodology for Credit Risk in EBA 2025 Stress Test 

Below we share the most significant aspects for Credit Risk and related challenges. In the coming weeks we will share separate articles to cover areas related to Market Risk, Net Interest Income & Expenses and Operational Risk. 

The final methodology, along with the requirements introduced by the CRR3 poses significant challenges on the execution of the Credit Risk stress testing. Earlier we provided details on this topic and possible impacts on stress testing results, see our article: “Implications of CRR3 for the 2025 EU-wide stress test” Regarding the EBA 2025 stress test we view the following 5 points as key areas of concern: 

1- The EBA stress test requires different starting points; actual and restated CRR3 figures. This raises requirements in data management, reporting and implementation of related processes.  

2- The EBA stress test requires banks to report both transitional and fully loaded results under CRR3; this requires the execution of additional calculations and implementation of supporting data processes. 

3- The changes in classification of assets require targeted effort on the modelling side, stress test approach and related data structures. 

4- Implementation of the Standardized Approach output floor as part of the stress test logic. 

5- Additional effort is needed to correctly align Pillar 1 and Pillar 2 models, in terms of development, implementation and validation. 

At Zanders, we specialize in risk advisory and our consultants have participated in every single EU wide stress testing exercise, as well as a few others going back to the initial stress tests in 2009 following the Great Financial Crisis. We can support you throughout all key stages of the stress testing exercise across all areas to ensure a successful submission of the final templates. 

Based on the expertise in Stress Testing we have gained over the last 15 years, our clients benefit the most from our services in these areas: 

• Full gap analysis against latest set of requirements 

• Review, design and implementation of data processes & relevant data quality controls 

• Alignment of Pillar 2 models to Pillar 1 (including CCR3 requirements) 

• Design, implementation and execution of stress testing models 

• Full automation of populating EBA templates including reconciliation and data quality checks. 

Contact us for more information about how we can help make this your most successful run yet. Reach out to Martijn de Groot, Partner at Zanders.