The New EU Banking Chair and the Crisis He Walks Into on Day One

François-Louis Michaud takes the EBA helm as European banks face their biggest geopolitical stress test since 2008. Here is the specific challenges he faces immediately.

The appointment of François-Louis Michaud as European Banking Authority Chair comes at a moment when the European banking sector faces a stress test that no stress testing framework currently in use was designed to model. The Iran war's energy price shock, the potential ECB rate reversal from cutting to hiking, the sovereign debt implications of emergency energy spending, and the corporate credit quality deterioration expected in energy-intensive sectors — these factors interact in a compound crisis scenario whose probability was assessed as negligible six months ago.

The EBA's most recent EU-wide bank stress tests, completed in 2025, modelled severe scenarios including a sharp economic recession, a property market correction, and a sovereign debt stress event. They did not include a geopolitical shock of the current type as a primary stress scenario — partly because the Iran war scenario was not foreseeable at the planning stage, and partly because geopolitical shocks are inherently difficult to model given the non-linear escalation dynamics they involve.

Michaud's first operational challenge will therefore not be executing a carefully considered new agenda but managing the immediate supervisory implications of a crisis that the EBA's existing frameworks must be adapted to address. The specific supervisory questions include: how to assess the credit risk of European bank exposures to energy-intensive corporate sectors whose cost structures have been dramatically disrupted; how to evaluate sovereign debt portfolio risk in member states whose fiscal positions are being stressed by emergency energy spending; and whether the bank stress testing programme planned for later in 2026 needs to be modified to include the Iran war scenario variants that have become operationally relevant.

On the structural agenda, the EU's new bank failure resolution rules — approved in the same Mayer Brown briefing that confirmed Michaud's appointment — give the EBA additional implementation responsibilities that will define how European bank supervisors respond to the next bank failure event, whenever it occurs.