Stress testing must involve identifying possible events or future changes in economic and other conditions that could have unfavourable effects on the conventional bank licensee’s credit exposures and assessing its ability to withstand such changes. Three areas that the licensee could usefully examine are: (i) economic or industry downturns; (ii) market risk events; and (iii) liquidity conditions. Stress testing can range from relatively simple alterations in assumptions about one or more financial, structural or economic variables, to the use of highly sophisticated financial models.