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DUBLIN - AIB Group (OTC:AIBRF) plc demonstrated strong capital resilience in the European Banking Authority’s (EBA) 2025 EU-wide stress test, maintaining a 13.4% Common Equity Tier 1 (CET1) ratio under the adverse scenario, according to a statement released Friday.
The bank reported capital depletion of 2.98% in the hypothetical adverse scenario, a significant improvement compared to the 6.32% depletion recorded in the 2023 exercise. The bank attributed this improvement primarily to increased net interest income resulting from the higher interest rate environment.
AIB’s CET1 ratio of 13.4% in the adverse scenario remains well above the bank’s total SREP capital requirements of 5.85%, which consists of Pillar 1 (4.5%) and Pillar 2 requirement (1.35%).
The stress test, conducted by the EBA in cooperation with the Central Bank of Ireland, the European Central Bank, the European Commission, and the European Systemic Risk Board, applied a static balance sheet assumption as of December 2024 and covered a three-year time horizon from 2025 to 2027.
The adverse scenario simulated a hypothetical severe escalation of geopolitical tensions with increasingly inward-looking trade policies globally, leading to increased energy and commodity prices, supply chain disruptions, and adverse effects on private consumption and investment.
AIB’s actual CET1 ratio stood at 15.11% as of December 2024, with a restated ratio of 16.38% following Basel IV implementation on January 1, 2025. The bank reported a CET1 ratio of 16.4% for the first half of 2025, which does not include interim profits pending a final decision on payout at year end.
The EBA stress test does not contain a pass-fail threshold but is designed to help competent authorities assess banks’ ability to meet prudential requirements under stressed scenarios, according to the press release statement.
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