stress testing in banking

Syllable breakdown

Dictionary meaning

a supervisory and risk management technique in which banks are subjected to hypothetical severe but plausible adverse economic scenarios — such as sharp recessions, property market crashes, or interest rate spikes — to assess whether their capital and liquidity buffers are sufficient to absorb projected losses; mandated by regulators including the Federal Reserve, European Banking Authority, and Bank of England as a key tool for identifying and addressing institutional vulnerabilities before they crystallise