Covid-forborne loans default en masse in EBA stress test

13.4% of ex-moratoria exposures in ‘stage three’ default at 2023 test end-point

Loans that benefited from Covid-19 moratoria performed abysmally in European Union-wide banking stress tests, defaulting at twice the rate for all exposures under the harshest three-year forecast.

Under the adverse scenario of the European Banking Authority's (EBA) latest stress test, the proportion of stage-three exposures – those designated as defaulted under IFRS 9 – among loans previously subject to Covid forbearance was projected to reach 13.4% at end-2023, up from 3.1% at end-2020.

That

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