In a deflationary environment, in which short-term nominal interest rates have already been pushed to zero, the central bank can no longer ease policy in the usual way. That is not to say that a central bank with its traditional policy rate at zero lacks tools to boost aggregate demand and thereby combat deflation.
Like all supervision, stress testing conducted during normal times of solid economic growth and financial stability is aimed at helping ensure banks remain in safe and sound condition. We use it to set the capital buffers, which give firms incentives to hold capital during normal times, so they are prepared to weather downturns.