The European Banking Authority (EBA) published on Thursday 11 June a draft of the methodology it will apply during the 2027 banking stress test, which will integrate climate risk for the first time.
Covering 63 banks from the EU and Norway managing 75% of total banking assets, these stress tests will assess banks’ exposures to non-financial corporations and real estate as transmission channels for climate transition risks. Climate risk will be compiled in a separate module, the results of which will not have direct consequences for the banks assessed.
The European authority defines climate transition risk as “a sudden, stringent shift in climate policy in an unprepared, fossil-fuel-dependent world triggering rapid capital reallocation, financial turmoil, and severe real-economy impacts”. In addition, it defines physical risk as “the potential financial and economic damage caused by riverine flood events occurring within EEA Member States simultaneously”.
Furthermore, responding to industry demands, the EBA methodology reduces the amount of data required by 55% compared to the 2025 banking stress test (see EUROPE 13693/10). Specifically, data and models used in previous tests, which duplicated regular monitoring reports, will be eliminated.
See the EBA methodology: https://aeur.eu/f/mbp (Original version in French by Mathieu Bion)