In the run-up to the financial crisis of 2008–09, banking supervisors had largely followed a microprudential approach towards assessing banks. As such, many of the “first-generation” stress tests used by bank supervisors after the crisis were data-heavy bottom-up exercises that focused on solvency risks. Some supervisors also considered liquidity risks, but these risks were often viewed as independent of solvency risks, to be estimated separately. Additionally, authorities’ stress tests often did not consider the potential interlinkages in the banking system or ways in which bank behaviour might collectively prove destabilising to the financial system.[...]