Stress testing as a tool for simulating the effects of crisis in banks

Emergence of crisis in financial markets, especially banks, have forced a change in approach to riskmanagement. It has become necessary to develop new or refine existing models of early bankruptcythreat warning, as well as establishing the potential impact of bank failures. One of the tools, indicatingthat resistance to the phenomenon of crisis is “stress testing”. Its aim, at least in the case of banks,is concerned with estimating the level of economic resistance towards the occurring risk. Some ofthese risks are: the non-payment of loans due to deterioration in the economic situation of a country,fluctuations in interest rates, exchange rates and a fall in prices of securities which are traded on stockexchanges. This article discusses the nature of stress testing and shows the current legislation in Polandand presents the results of a stress testing conducted on the largest U.S. banks in May 2009. The rankand results of these studies show the importance of the role of stress testing as a complementary research of a diagnostic and prognostic nature.