Extending bank stress test results for macroprudential purposes

Motivation
Stress tests constitute an important forward-looking tool to support policymakers. By simulating banks’ reactions to severe but plausible adverse scenarios, stress tests help uncover hidden vulnerabilities. Based on the results of the EU-wide bottom-up 2025 stress test, we use a top-down, model-based toolkit to assess additional risks (such as climate risk, liquidity risk and contagion risk), perform policy simulation exercises, and develop novel approaches to gauging the severity of the adverse scenario. This helps us answer questions such as: What additional vulnerabilities emerge once system‑wide interactions between banks and non-banks are considered? What is the impact on the system when transition and physical climate risks are incorporated into the adverse scenario? How do banks’ reactions in stress tests amplify or ease downturns, and to what extent does releasing macroprudential buffers during stress sustain lending and support the real economy? In this webinar, the key findings of the ECB’s latest Macroprudential Stress Test Extension Report (MaSTER) will be presented and discussed, with a focus on risk identification and policy considerations.