On 12 December 2025, the European Central Bank (ECB) announced that it will be assessing 110 directly supervised banks on the management of geopolitical risk.

As a key driver of macroeconomic uncertainty, geopolitical risk remains at the centre of the ECB’s supervisory priorities for 2026-28.

Reverse geopolitical risk stress test

As part of their 2026 internal capital adequacy assessment process the banks will conduct a reverse geopolitical risk stress test which will assess the extent to which their stress-testing capabilities take geopolitical risks into account. The stress test is intended to provide insights into the geopolitical risk-related scenarios that could materially affect banks, who should identify relevant geopolitical events and quantify their impact. In addition, they will be asked to describe how they would act to reduce that impact, if necessary, with a view to ensuring that they have robust governance and operational resilience frameworks in place.

In particular, each bank will identify the most relevant geopolitical risk events that could lead to at least a 300-basis point depletion in its Common Equity Tier 1 capital. In addition to reporting on how the geopolitical risk scenario would affect their solvency positions, banks will also be asked to provide information about how it may affect their liquidity and funding conditions.

Next steps

The main aggregate conclusions of the reverse stress test will be communicated in the summer of 2026.

Weaknesses revealed by the reverse geopolitical stress test will feed into the Supervisory Review and Evaluation Process assessment.