Stress Testing


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Related to Stress Testing: Performance testing, Cardiac stress testing

Stress Testing

A process, usually computerized, that evaluates an institution's reaction to different situations. Specifically, stress testing measures whether the institution has adequate capital and/or assets to respond effectively to various, adverse scenarios presented by the computer program. Stress testing became particularly important in the United States in the spring of 2009 when Treasury Secretary Timothy Geithner conducted a series on troubled American financial institutions to determine which were able to raise private capital and could therefore begin repaying TARP funds extended the previous year.
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However, these systems typically lack the ability to handle non-interest rate macro variables for stress testing purposes or determine the loss component on various loan portfolios under different economic scenarios.
The Reserve Bank's framework for stress testing involves a significant role for participant banks in assessing the impact of the stress scenario.
Caption: FIGURE 2: Bland-Altman plot of METs estimated from history versus measured by exercise cardiac stress testing.
Since stress testing is "a tool to evaluate the potential effects of specified changes in risk factors on a bank's financial position under a severe but plausible scenario," banks must develop "sound assumptions generally depicting events or scenarios that may result in significant losses and to assess the impact of these scenarios on the bank's performance or capital and liquidity positions," said the BSP.
Based on the results of stress testing, the central bank explained banks could adopt proactive measures such as the implementation of capital build up initiatives or enhancement of risk management practices all aimed at improving their resilience in times of actual crisis.
The global cardiopulmonary stress testing devices market report provides market size estimates (Revenue USD million - 2013 to 2020) for key market segments based on the type of cardiac stress testing monitors used (CPET/CPEx, desktop and portable CPET, pulse oximeter, SPECT/SPET, ECG, and stress blood pressure monitors) and forecasts growth trends (CAGR% - 2016 to 2020).
(b) To highlight the specificities of risk exposures in Islamic financial institution and how they need to be captured in stress testing exercise; and
(2) Reliance on a single scenario violates good practice advice on stress testing and even common sense (see Finger 2008).
For patients unable to exercise, doctors may perform pharmacologic nuclear stress testing, using medications to simulate exercise's cardiac effects.
Eight major UK banks and building societies have participated in the first concurrent stress testing exercise of the UK banking system, the results of which Britain's central bank the Bank of England revealed on Tuesday.
The 2014 UK stress testing exercise will be built on the EU-wide stress test, which was announced in January this year by the European Banking Authority (EBA).