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Stress testing regulated entities

Stress testing assesses the resilience of banks and insurers to severe but plausible risks, including economic downturns. The results of stress tests help us monitor financial stability and our policy decisions and also help entities manage risk and set capital and liquidity buffers.

Why we stress test

We use stress tests to:

  • investigate and understand the implications of current and emerging risks to financial stability
  • assess the resilience of participating banks when subject to severe stress
  • support improvements in how individual banks use stress tests to identify and manage the risks facing their business.

Our stress test framework

We have a comprehensive stress testing framework, which involves participating banks having a significant role in assessing the impact of stress scenarios.

We expect banks to invest in stress testing models and infrastructure, and carry out their own internal stress tests as part of their Internal Capital Adequacy Assessment Process (ICAAP).

In July 2018, we published a Bulletin article outlining our approach to stress testing banks, and how we interpret test results when assessing the stability of the financial system.

In May 2016, we also issued a discussion document on stress testing methodology for New Zealand incorporated banks.

Results of recent stress tests

We report on what the results of stress testing means for the financial system in our 'Financial Stability Report'. We also provide more detailed analysis in the following bulletin articles.


Solvency stress test

2022 Bank Solvency Stress Test: Assessing the resilience of banks to a stagflation scenario

Liquidity stress test