October 31, 2014 12:11 pm
Have you ever felt challenged, strained, forced, constrained, stressed out by work or impending pledges? Have you ever worked with a strict deadline to complete your tasks? We assume this is familiar to most of us, but lately it happens not only to individuals, but also to great institutions. Particularly banks. It’s recent news that all the bank system in Europe has been scrupulously examined, “stressed”, by the European Central Bank, ECB. According to biology and psychology, stress is a reaction to a stimulus, a trigger or a so called “stressor”. But what kind of a stressor the banks have been subjected to? What can worry what are believed to be trusted financial institutions? What has challenged them? What type of strain can affect the solid foundations of a bank?
The answer is money, of course, credits, liquidity, deposits, loans, interests, haves and have nots. We won’t get bored with the details and the complexity of European economic policy, or accounting, with its strict standards, we are instead interested in and fascinated by words. The IATE term of the week is, as you may have guessed, “stress test”. We have chosen it for its massive presence in the media, among other words, for we find it very intriguing and useful in times of economic turmoil. A possible short definition of a “stress test” would be “a trial of resistence”, in its most general meaning. You can find one of the first use of the term in engineering physics, where “stress test” is the synonym of a simulation of strain for a power station in order to reassess the safety margins. We surely don’t need to be reminded about the safety in nuclear plants at all. But this is just one of the fields in which stress tests are used. Statistics and various technologies and industrial processes, too, have their own version, with some variations like the “step stress test”, which defines some rather esoteric regulation that involves a series of graduated interventions.
Back to finance and economy, we have various examples of its use, from macroeconomics to banking, each time with a slightly new meaning, according to the specificities of the different disciplines. Media always use the expression as it is, “stress test”, to refer to most of them. As for its exact meaning in finance and banking, here is the definition from IATE: “test to identify vulnerabilities across institutions, markets or economies that could undermine the stability of the financial system”.
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Social Media Specialist
Communication Trainee at TermCoord
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