Capital Stress Test
/ˈkæpɪtəl strɛs tɛst/
Definitions
- (n.) An assessment tool used by regulatory authorities to evaluate a financial institution's capital adequacy under adverse economic scenarios.
The bank successfully passed the annual capital stress test required by the regulators.
- (n.) A regulatory exercise aimed at ensuring that banks hold sufficient capital to withstand economic downturns and financial shocks.
Capital stress tests help prevent systemic risk by ensuring banks remain solvent during crises.
Forms
- capital stress test
- capital stress tests
Related terms
See also
Commentary
Capital stress tests are key in financial regulatory law to ensure institutional resilience and protect the financial system from systemic risk.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.