ECB tightens focus on data quality in 2025 stress tests
The European Central Bank (ECB) has launched its 2025 stress testing exercise, with a sharper focus on addressing data quality issues and overly optimistic projections from banks. Stress tests are critical for assessing resilience under adverse economic conditions, but past submissions have underestimated risks, prompting the ECB to tighten its approach.
This year, 96 euro-area banks will be tested against two scenarios: a baseline, reflecting expected economic conditions, and an adverse scenario, where geopolitical and economic shocks shrink the European economy by 6.3% by 2027. Banks’ internal projections will face enhanced scrutiny, with measures including delayed credit risk benchmarks and on-site inspections for those submitting unreliable data.
The ECB is also conducting a parallel scenario analysis on counterparty credit risks. This separate review focuses on risks tied to the growing non-bank financial intermediation sector, an area of increasing concern for regulators due to its opacity and systemic impact.
As we’ve said here before, reliable, trustworthy, structured digital data is the bedrock of effective analysis. By prioritising credible data in its stress tests, the ECB aims to strengthen trust in Europe’s banking sector amid an uncertain economic landscape.
For more details, read the full ECB update here.
