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

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

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.

Suggested Citation

  • Haselmann, Rainer & Heider, Florian & Kaiser, Luis Enrique & Schlegel, Jonas & Tröger, Tobias, 2025. "The impact of geopolitical risks on the resilience of banks in the Banking Union," SAFE White Paper Series 115, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:333389
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    References listed on IDEAS

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