Large Swedish banks show resilience in the EBA’s stress test

The EBA's stress test assessed the resilience of the European banking system in an adverse three-year macroeconomic scenario during 2025-27. The scenario featured a recession in connection with a worsening of geopolitical developments. Increasing protectionism is assumed to cause disruptions in supply chains, with higher commodity and energy prices. This results in higher inflation and interest rates, as well as negative effects on private consumption and investment. 

The stress test covered a sample of 64 banks, accounting for roughly 75 per cent of total banking sector assets in the EU and Norway. The exercise involved close cooperation between the EBA, the European Central Bank (ECB), the European Systemic Risk Board (ESRB) and the national supervisory authorities. The Swedish banking groups taking part in the stress test were Svenska Handelsbanken, Skandinaviska Enskilda Banken, Swedbank, SBAB Bank and Länsförsäkringar Bank. To estimate the effects of the scenario, banks followed a detailed methodology prescribed by the EBA. As the national supervisory authority for Sweden, Finansinspektionen (FI) quality assured the Swedish banks' assumptions and outcomes to ensure that results are comparable between banks. 

The EBA's stress-test methodology

In the EBA's stress test, banks use their own bank-specific data and apply their own models to project the results, under the assumption of a static balance sheet. But they are required to adjust their results to reflect the definitions, constraints, caps and floors defined in the EBA's methodology. This is necessary to ensure a minimum degree of conservatism, consistency and comparability of the projections. A key benefit of the EBA methodology therefore is that the impact on capital ratios of credit losses, reduced earnings and changes in risk-weighted assets is comparable between banks. The results should therefore primarily be viewed as a comparison of how much different banks in the EU could be affected in a severe economic downturn, not as an exact forecast of how banks' credit losses, earnings and risk-weighted assets would develop if the scenario materialised. 

The EBA's stress test shows results for banks' capital ratios in two different ways. Capital ratios on a transitional basis reflect the gradual phase-in of the changes in the rules for capital requirements that is planned in the EU. Some of these changes will apply as late as 2033. Capital ratios on a fully loaded basis show what would happen if all the rule changes applied instead at the start of the stress test. 

None of the banks breach their capital requirements in the stress test

The five Swedish banks showed satisfactory resilience against the adverse scenario in the stress test. The maximum reduction in the common equity tier 1 capital ratio (CET1-ratio) was between 0.7 and 2.1 percentage points for the major Swedish banks (Svenska Handelsbanken, Skandinaviska Enskilda Banken and Swedbank) during the three years of the stress test, on a transitional basis. There was also a limited impact on the other Swedish banks (Länsförsäkringar Bank and SBAB Bank). All the Swedish banks in the stress test were thus able to withstand the adverse scenario without breaching the capital requirements that FI expects them to meet. 

The results for banks' capital ratios on a fully loaded basis indicate that banks will need to adjust to the new rules and that banks should not postpone the necessary adjustments until the end of the phase-in period. Banks are aware of the need to adjust. At FI we follow this as part of our ongoing supervision. 

As in previous years, we will take into account the results of the EBA's stress test, as well as the results of other stress tests, in our assessment of banks' total capital needs as part of the supervisory review and evaluation process (SREP).