EBA stress test: Aggregate capital ratios by country

Ireland's banking sector would be the worst affected in Europe in terms of capital depletion under the adverse scenario in the European Banking Authority's latest stress test.

The aggregate common equity Tier 1 ratio of tested Irish banks — AIB Group PLC and Bank of Ireland Group PLC — would drop to 8.44% in 2023 from 14.52% at the end of 2020 in an adverse scenario that takes into account the consequences of a prolonged COVID-19 crisis as well as a lower-for-longer interest rate environment, with EU GDP contracting by a cumulative 3.6% between 2021 and 2023 and unemployment rising by 4.7 percentage points.

The stress test found that banks would suffer a total capital depletion of €265 billion under such conditions, leading to a drop in the aggregate CET1 ratio to 10.16% on a fully loaded basis, compared to 15.01% at 2020-end under a baseline scenario.

The aggregate CET1 ratios of banks in France, Austria, Spain, Germany and Italy that participated in the test would also fall below the EU-wide average.