EU: EBA finalises methodology and templates for 2027 stress test, including new climate risk module

The European Banking Authority (EBA) has issued its final methodology, draft templates and template guidance for the 2027 EU-wide stress test which includes, for the first time, a dedicated climate risk module, marking a clear shift towards embedding climate considerations into prudential supervision.

Background

The stress test exercise is used to assess the resilience of banks and the broader EU banking system under adverse conditions, while also providing input for supervisory assessments. The 2027 stress test will cover 63 banks from the EU and Norway, including 47 banks from the euro area, representing approximately 75% of the EU banking sector.

The new Climate risk module

The new climate module will evaluate the impact of both transition and physical climate risk assessments alongside the adverse macro financial stress test. The EBA positions this as a first step in a gradual, multi-year integration of climate risk into stress testing and supervision. 

• The transition risk scenario looks at how a sudden, disorderly shift in climate policy would impact corporate borrowers in carbon-intensive sectors over the full 2027-2029 horizon.
   

• The physical risk scenario looks at a one-in-a-hundred-year river flood event, applied as a one-off shock in 2027 only. 

The climate module focuses on exposures to non-financial corporations and on real estate secured lending (including a breakdown of mortgages by how energy-efficient the underlying property is) where transition and flood risks are most material.

The climate module is limited as it only applies to selected credit exposures, such as loans where policy or flood shocks could affect the borrower or the collateral. It does not change capital requirements. Banks cannot assume any mitigating effects from energy-efficiency renovations or from the repair of the damaged immovable property.

The introduction of the new climate module forms part of a series of changes by the EBA to the stress test, which includes a significant simplification, with a 55% reduction in data points compared to the 2025 exercise.

The EBA has published the methodology and templates well ahead of the formal launch by end of January 2027, when the relevant macroeconomic scenarios will be released, to give banks sufficient time to prepare.

The EBA press release, published on 9 November 2026, is available here.