This study examines how supervisory stress testing affects bank behavior and systemic risk in Europe. Researchers used confidential data from the European Banking Authority's 2021 and 2023 EU-wide stress tests. They employed a difference-in-differences approach to compare banks that underwent stress tests with similar banks that did not. The analysis focused on how these tests influenced banks' portfolio management decisions. The study found that banks engaged in anticipatory behavior, improving their capital ratios before stress tests. This "window-dressing" was more evident in banks that later performed poorly in the tests. These pre-test adjustments resulted in banks having less similar portfolios. This reduced portfolio similarity persisted even after the stress tests concluded. However, this effect did not lead to more concentrated business models or country-specific clusters. The findings suggest stress tests can both improve individual bank resilience and lower systemic risks. The research contributes to discussions on effective banking supervision and stress test design.