Stress-testing has come a long way in recent years, but researchers need to go further in modelling the non-bank sector and two-way feedback mechanisms, a study published by the Bank of England finds.

The authors – from the BoE, King’s College London and International Monetary Fund – survey the stress-testing literature and conclude “great strides” have been made so far.

Models now capture a wider range of “propagation channels” and more realistic behaviour. “Substantial progress” has also