Stress Testing (Banks)

Stress Testing
http://www.investopedia.com/terms/s/stresstesting.asp

What Does Stress Testing Mean?
A simulation technique used on asset and liability portfolios to determine their reactions to different financial situations. Stress tests are also used to gauge how certain stressors will affect a company or industry. They are usually computer generated simulation models which test hypothetical scenarios. Also known as "stress test"

Investopedia explains Stress Testing
Stress-testing is a useful method of determining how a portfolio will fare during a period of financial crisis. The Monte Carlo simulation is one of the most widely used methods of stress testing.
A stress test is also used to evaluate the strength of institutions. For example the Treasury Department could run stress tests on banks to determine their financial condition. Banks often run these tests on themselves. Changing factors could include interest rates, lending requirements, or unemployment.

Bank stress test results released May 4
Evaluation of top 19 U.S. banks will include a capital recovery plan.
http://money.cnn.com/2009/04/16/news/economy/stress_test_results.reut/index.htm?section=money_latest

WASHINGTON (Reuters) -- The results of tests to gauge how the top 19 U.S. banks would fare should the deep U.S. recession worsen will be publicly disclosed on May 4, a regulatory official said Thursday.
The so-called stress test results will include a capital recovery plan for banks that regulators determine would be short of capital if the economy's downturn gathered steam and unemployment shot unexpectedly higher, the official said.
Regulators have not made final decisions on how to present the results, the official said. Regulators will disclose at least some of the information, but no decision has been made on on whether banks themselves will disclose some as well. Read article...