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EBA’s 2023 EU-wide stress test has been launched

The European Banking Authority (EBA) launched the 2023 EU-wide stress test and released the macroeconomic scenarios. This year’s stress test is designed to assess the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. The adverse scenario is based on a narrative of heightened geopolitical tensions (e.g., no Russian gas to Europe), leading to high inflation and higher interest rates. Subsequently, these have a strong adverse effect on private consumption and investments, both domestically and globally. In terms of GDP decline, the 2023 adverse scenario is the most severe one used in the EU–wide stress tests up to now. The EBA expects to publish the results of the exercise at the end of July 2023.