DNB: Stress tests show resilience of large European banks

The European banking sector is resilient when severe economic headwinds arise, such as a deep global recession. This is the conclusion of De Nederlandsche Bank (DNB) following stress tests of the 70 largest European banks by the European Banking Authority (EBA) and the European Central Bank (ECB). These tests also examined ING, ABN AMRO, Rabobank, as well as Volksbank.

As part of the test, the banks were exposed to severe economic contraction and high inflation, as well as a sharp decline in asset prices and higher interest rates over three years. It looked at a certain key measure of the banks' financial health and their ability to withstand losses. Therefore, banks' balance sheets seem to be strong enough, which is also helped by the central banks' interest rate hikes, as they have more interest income as a result.

The EBA and the ECB conduct a stress test every two years to assess the resilience of the largest European banks and identify potential risks. The data from this stress test is used by regulators to calculate capital requirements for banks, among other things. For banks, the result is important when it comes to paying dividends and buying back their own shares.

ABN AMRO has already announced that the stress test confirms the group's strong capital position.