The Reserve Bank has released a new animated video explaining banking sector stress tests.

Stress testing is a tool to assess how banks might cope with a severe economic downturn.

The two-minute animated video explains how stress tests work and why the Reserve Bank uses them to monitor and respond to risks in the banking sector.

The video is part of a series of animated videos prepared by the Reserve Bank. These include ‘The OCR and how it works’, ‘What is the economy?’, ‘Compound Interest’ and ‘What is money?’.

Watch the video here: http://www.rbnz.govt.nz/research-and-publications/videos/stress-testing-animated-video