Resilience Test

A resilience test, or stress test, is an analysis of the ability of a bank or insurance company to withstand major market movements. Certain scenarios are assumed such as a 100 percent rise in world oil prices, a 25 percent fall in share prices or a five percent rise in official interest rates. Calculations are then made to assess whether a firm could cope, whether it would have sufficient capital to cover its losses. If not, should extra provisions be made, should investment strategies be changed?

See also: Solvency Margin