Macroprudential stress tests

Ron Anderson, Chikako Baba, Jon Danielsson, Heedon Kang, Udaibir S. Das and Miguel Segoviano

Current stress testing of banks is focused on the resiliency of individual banks to exogenous shocks. This column describes how the next generation of macroprudential stress tests aim to capture the endogenous nature of systemic risk caused by the interaction of all the institutions and markets making up the financial system. This will lead to a better policy mix aimed at preserving financial stability.