Commodity prices also take a hit in the EBA's adverse scenario, with oil prices down about 48 percent this year from the baseline projection of about US$54 a barrel. Brent crude for April settlement lost as much as 56 cents, or 1.6 percent, to $33.85 a barrel Thursday morning on the London-based ICE Futures Europe exchange. Prices remain about 44 percent below baseline levels in 2017 and 2018 in the EBA test.

The scenario projects that long-term interest rates in the EU would be higher by 71 basis points in 2016, 80 basis points in 2017, and 68 basis points in 2018. Meanwhile, the test includes an overall decline of 6 percent in house prices, a supplemental shock of 7.5 percent affecting all EU countries and additional house-price declines in Denmark, Ireland, and Slovakia.

In 2014, to pass a baseline scenario, banks had to maintain a ratio of capital to risk-weighted assets of 8 percent. In the adverse scenario, which allowed lenders to run down capital buffers, the ratio was 5.5 percent. Twenty-four banks failed that test with a capital shortfall of 24.6 billion euros ($27.1 billion).

Stress Tests to Keep Banks on Their Toes

“The objective of the crisis stress tests was to identify possible capital shortfalls and require immediate recapitalization actions,” the EBA said. “As banks have now moved to a more steady-state setting, the aim of the 2016 exercise is rather to assess remaining vulnerabilities and understand the impact of hypothetical adverse market dynamics on banks.”

The 51-bank exam, whose results will be published early in the third quarter, comes after banks including Societe Generale SA, HSBC Holdings Plc, and Standard Chartered Plc reported disappointing earnings that raised questions among investors and regulators about lenders' ability to make a profit.

“Since the start of the year we have seen investor concern about lenders' high level of debt, exposure to the oil and gas sector with falling commodity prices, and the slowdown in growth in China,” said Edward Chan, partner at Linklaters LLP in London. “The stress tests are designed to ensure that banks have a sustainable business model in the face of such turbulence.”

Daniele Nouy, head of the ECB's oversight arm, said on Feb. 23 that her chief priority in 2016 is reviewing how lenders are changing their business models and investing in riskier assets to ensure they can remain profitable.

The ECB and the BOE have said this year that the industry is well capitalized and they won't be imposing significant new capital requirements. Nouy said it's not the ECB's intention to raise capital requirements indefinitely. With regard to bank-specific requirements set by supervisors, “we expect the banks to hold in steady state,” she said. “All things being equal, supervisory requirements will not be increased further.”

Even without the threat of capital gaps being revealed, stress tests are useful to “keep banks on their toes a bit,” said Robert Montague, senior financials analyst for ECM Asset Management, part of Wells Fargo Asset Management which has $490 billion under management. The assessments are “a good thing in that they make comparable data available across the piece,” he said.

The EBA said the data from the tests will help regulators supervise individual lenders, “where mitigating actions may also be considered.”