The impact of geopolitical risks on the resilience of banks in the Banking Union

Rainer Haselmann, Florian Heider, Luis Enrique Kaiser, Jonas Schlegel and Tobias Tröger

No 115, SAFE White Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This study quantifies the impact of geopolitical risk on euro area banks using the 2025 EU-wide stress test, the first to include an explicit geopolitical scenario. Comparing outcomes with earlier stress tests, we find that geopolitical shocks measurably erode capital ratios, with smaller and less diversified banks most affected and considerable heterogeneity across countries. The results highlight how stress testing can capture structural vulnerabilities and inform supervisory responses through Pillar 2 requirements and Systemic Risk Buffers within the Banking Union framework. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.

Keywords: Geopolitical Risk; European Banks; Stress Testing (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-eec and nep-eur
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewh:333389

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