stress test , in financial terminology , is an analysis or simulation designed to determine the ability of a given financial instrument or financial institution to deal with an economic crisis . Instead of doing financial projection on a " best estimate " basis , a company or its regulators may do stress testing where they look at how robust a financial instrument is in certain crashes , a form of scenario analysis . They may test the instrument under , for example , the following stresses : This type of analysis has become increasingly widespread , and has been taken up by various governmental bodies ( such as the PRA in the UK or inter-governmental bodies such as the European Banking Authority ( EBA ) and the International Monetary Fund ) as a regulatory requirement on certain financial institutions to ensure adequate capital allocation levels to cover potential losses incurred during extreme , but plausible , events . The EBA 's regulatory stress tests have been referred to as " a walk in the park " by Saxo Bank 's Chief Economist . This emphasis on adequate , risk adjusted determination of capital has been further enhanced by modifications to banking regulations such as Basel II . Stress testing models typically allow not only the testing of individual stressors , but also combinations of different events . There is also usually the ability to test the current exposure to a known historical scenario ( such as the Russian debt default in 1998 or 9/11 attacks ) to ensure the liquidity of the institution . In 2014 , 25 banks failed in stress test conducted by EBA
9/11 attacks
September 11 attacks
Stress test (financial)