Stress Testing

Stress Testing is a critical regulatory and risk management tool used by financial institutions to assess their resilience and capital adequacy under severe, hypothetical adverse economic and financial market scenarios, such as a sharp recession, a sudden collapse in asset prices, or a significant operational failure. This forward-looking analysis, mandated by regulators like the Federal Reserve (DFAST/CCAR) and the Basel Committee, quantifies potential losses and capital depletion to ensure the institution can absorb shocks without failing, thereby safeguarding the stability of the broader financial system.