EU banks get first taste of new stress test-driven buffer regime

Of the 50 stress-tested lenders, three would fall into the highest Pillar 2 Guidance bucket

More than half participating banks in the latest EU-wide stress tests would be saddled with an extra buffer of between 0.5% and 2% of their core capital, based on upcoming rules that tie solvency guidance to performance in the exercise.

The European Central Bank (ECB)’s new approach to Pillar 2 Guidance sorts each bank across four buckets, based on the maximum depletion of their Common Equity Tier 1 ratio in the latest stress test. Each bucket marks a range of possible P2G buffers as a