European and domestic stress tests completed: banks’ resilience good also against changes in the operating environment resulting from geopolitical tensions

The stress tests for Finnish banks were conducted by the European Banking Authority (EBA), the European Central Bank (ECB) and the Financial Supervisory Authority (FIN-FSA). The stress-testing exercise covers the three years from 2025 to 2027 and includes a baseline scenario and an adverse scenario. 

Of the Finnish banks subject to European Central Bank (ECB) supervision, OP Financial Group and Nordea participated in the EBA stress test. In the adverse scenario, Nordea’s Common Equity Tier 1 (CET1) ratio falls by 2.9 percentage points, and OP Financial Group’s CET1 ratio falls by 5.0 percentage points. In the 2023 stress tests, the corresponding figure for Nordea was 3.3 percentage points and for OP Financial Group it was 5.5 percentage points.

Parallel to the EBA stress tests, the ECB conducted its own stress test for banks it supervises directly but which were not included in the EBA-led stress test sample. One Finnish credit institution, Municipality Finance, participated in this stress test. The EBA has published more detailed information on the stress test results of Nordea and OP Financial Group, and the ECB has published some key figures of Municipality Finance.

Capital buffers of smaller Finnish banks reasonable

In Finland, the banks and groups that due to their smaller size are subject to the FIN-FSA’s direct supervision are Alisa Bank, Aktia Bank, Oma Savings Bank, POP Bank Group, S-Bank, Mortgage Society of Finland, the Savings Banks Group and Bank of Åland. The FIN-FSA stress-tested these banks using the same scenarios that were applied in the EBA and ECB stress tests.

The results show that the average capital position of the smaller Finnish banks remains good also in the adverse scenario. The average Common Equity Tier 1 (CET1) ratio fell in the adverse scenario by 3.6 percentage points, whereas in the 2023 stress tests, the ratio declined by 3.8 percentage points. However, the capital ratios differed considerably between the banks. 

Adverse macroeconomic scenario focuses on the possible impacts of geopolitical tensions

The adverse scenario for the stress test assumes an escalation of geopolitical tensions. World trade, supply chains and confidence are exposed to persistent and significant shocks, accompanied by a rise in energy and commodity prices. These factors, in turn, weaken private consumption and investment strongly, both in the domestic economy and in the world economy, leading to a global recession. In the adverse scenario, Finland’s real GDP drops by a total of 7.4% in the period 2025–2027. At the end of the stress test horizon, unemployment in Finland is 7.9 percentage points higher than at the starting point. Inflation is expected to increase to 3.6% in 2025, before falling to 2.3% in 2026 and to 1.9% in 2027.

The purpose of the 2025 stress test exercise is to assess the resilience of the European banking sector against a significant weakening of economic growth. The risk of such a weakening of economic growth has risen considerably in the current uncertain and changing geopolitical environment.

Under the stress tests, each bank uses a common framework and methodology to assess the impact on its own profits and capital position based on figures at the end of 2024. Supervisory authorities will apply the stress test results as an input to the supervisory review and evaluation process (SREP). The SREP process is designed to ensure that supervised entities have sufficient own funds to cover material risks.

See also

• EBA press release
• ECB press release
• Stress test adverse scenario 2025–2027, for 8 smaller banks (LSI banks) (pdf)

Contact information:

For further information, please contact Jyri Helenius, Deputy Director General. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5030, weekdays 9:00–16:00.