Tag: IMF

Bank Stress Test Explained

Bank Stress Test Explained

Financial Markets Explained
Bank stress test is mainly used in order to ascertain the stability of the given institution, in this aspect, the bank. Bank stress test involves testing the entire banking system beyond its operational capacity to the extreme up to the breaking point in an effort to monitor the results and therefore the overall stability of the bank. Bank stress test is aimed to measure the robustness of the financial system in scenarious such as system crashes and so on. Bank stress test does not involve financial projections or a best case scenario but on the contrary, focuses on the worst case scenario. The ultimate goal is whether a bank has the required wealth and assets to overcome any adverse developments in the financial markets. Bank stress tests took prominence as the European and US banki...