The Canada Mortgage and Housing Corporation (CMHC) has released the results of its 2016 stress testing exercise, which measured the organisation's ability to withstand the effects of global deflation, an oil shock, and other dire situations.

CMHC says the tests confirm that the organization has enough capital to make it through even the most extreme scenarios. According to the results, which were released last week, CMHC's mortgage loan insurance and securitization businesses would be able to survive:

• A "severe and prolonged" global economic depression.
• An oil price shock in which the of oil falls to US$20 per barrel in 2017 and subsequently ranges between US$20-30 for another four years.
• A high-magnitude earthquake that disrupts critical infrastructure and services in a major urban centre
• A sudden increase in interest rates that leads to higher borrowing costs for both Canadian consumers and financial institutions, causing a severe drop in Canadian house prices and ultimately the failure of a Canadian financial institution.
• A US-style housing crash in which unemployment increases by 5% while house prices drop by 30%

“Stress testing involves searching out extreme scenarios that have a very remote chance of happening and planning for them,” says CMHC’s Chief Risk Officer Romy Bowers, “Rigorous stress testing is an essential part of our risk management program and allows CMHC to evaluate its capital levels against these scenarios.”