Bank licence applicants face strict 36-month capital stress tests

The framework requires applicant credit institutions to demonstrate compliance with initial, risk-based and leverage ratio capital rules over a 36-month horizon.

Capital needed for the first 12 months under baseline and severe stress scenarios must be fully paid up before authorisation takes effect.

Capital projected for years two and three must stem from promptly available sources, excluding uncertain future market issuances.

The assessment also enforces management suitability under the four-eyes principle requiring at least two executive directors.

Direct and indirect owners with qualifying stakes, or the 20 largest shareholders, undergo comprehensive integrity and financial soundness checks.

The revised guide replaces the 2019 edition, reflecting updated European Banking Authority guidelines and expanded remits covering crypto-asset services under MiCAR.

Since November 2014, the European Central Bank holds exclusive authority to grant licences across the Single Supervisory Mechanism through common procedures with national supervisors.

Higher-risk business models, such as fintech banks, must now provide solvent exit plans.

Prudential anti-money laundering assessments are coordinated with national bodies and the European Anti-Money Laundering Authority.