Bank Stress Testing

Overview

Bank stress testing is a process by which analysts create a forecast of the bank under a set of given stressul scenarios, such as a financial crisis or natural disaster.

Stress Testing and 2008 Financial Crisis

Stress testing in the United States became mandatory for under the CCAR and DFAST programs. They were instituted by the Federal Reserve in an attempt to shore up confidence in the banking sector. As the economy recovered from the crisis, stress testing was de-regulated so that most banks are no longer required to provide stress tests.