Coverage: weekly note · Information to 21 September 2026
TGB Premium Intelligence · Subscriber Edition
This report is part of TGB Premium Intelligence and is available by request to qualified institutions. It will not enter the open archive for at least twelve months.
TGB Weekly Research Note · 21 September 2026
Euro area banks' CET1 ratio holds at 16.00% and US banks stayed above minimum requirements in the Fed's 2026 stress test, while supervisors are turning to bank-specific scenarios, solvency-liquidity links and the realism of management actions.
The desk view
Capital is not the weak point for banks on either side of the Atlantic. The aggregate CET1 ratio of significant euro area banks was 16.00% in the second quarter of 2026, and in the Fed's 2026 stress test the aggregate ratio of 32 banks bottomed at a projected 11.2%. The ECB's reverse stress test instead asked 110 banks to design geopolitical scenarios depleting CET1 by 300bp, and flagged weaknesses in granularity, solvency-liquidity links and the realism of mitigating actions. The Fed's Vice Chair for Supervision has said she will set out how reverse stress testing can become a regular part of supervising the largest banks. Our view is that the binding constraint is becoming the quality of banks' own stress testing rather than the level of capital.
Capital is not the binding constraint
The ECB's aggregate CET1 ratio for significant institutions was 16.00% in the second quarter of 2026, against 16.09% a year earlier, with country aggregates ranging from 13.52% in Spain to 20.78% in Lithuania. Annualised return on equity reached 10.73%, the highest since the series began, and the non-performing loan ratio was 2.17%.
In the Fed's 2026 stress test, the aggregate CET1 ratio of 32 banks fell from 12.8% to a projected minimum of 11.2% after projected losses of $708 billion, still 6.7 percentage points above the 4.5% minimum. The Fed said the results will not change capital requirements, which stay in place until 2027. The supervisory question is therefore less whether banks hold enough capital in aggregate than whether each bank understands how its own balance sheet would behave in a shock no common scenario captures.