CBI Stress test
Central Bank stress test scenarios
The Central Bank of Iceland conducts annual stress tests in order to assess the systemically important banks’ resilience in the event of a simulated but possible economic shock. In the stress test, developments in loan losses, net interest income, and other important aspects of the banks’ operations are assessed under the stress scenario, together with their summarised balance sheet and profit and loss accounts. This assessment is based on statistical methods and, where applicable, expert opinion. It is a macroprudential stress test, which entails giving particular consideration to the results for the banking system as a whole and potential interactions with the real economy. The stress scenario is cyclical, so that the severity is allowed to increase when cyclical systemic risk is considered to increase. The Bank publicises the main results of the stress test in the autumn issue of its Financial Stability report. The scenarios used for the stress test are published as well, giving other parties the opportunity to use them in their own stress testing.