The objective of stress testing is to assess the resilience of the banking sector along with its ability to absorb shocks. Whereas supervisory authorities remain responsible for stress testing of banks on an individual basis, central banks would conduct analyses in order to determine aggregate need for capital and liquidity requirements.
These testing procedures, based on common scenarios, would focus on macroeconomic shocks and the resulting response of the banking sector. The tests would focus on credit risk, equity price risk, foreign exchange risk, interest rate risk and liquidity risk.