Financial Stability

Overview

It is only in the last decade or so that central banks around the world have begun to make financial stability an explicit goal or to measure the stability of their financial systems. This site is designed to give researchers, policymakers, and interested readers an overview of the topic along with resources that will help you stay abreast of developments in the area. Resources include:

Defining It. Financial stability has been the subject of many articles, speeches, conferences, and books, and yet its definition remains somewhat elusive. The term itself did not come into common usage much before 1996, when the Bank of England launched its Financial Stability Review. Most people, when pressed, would probably define it as the absence of financial instability or as the lack of systemic financial crises or panics. Perhaps the key point is systemic focus, in that the concern is not with the stability of a particular bank, firm, or household, but the financial system as a whole.  (Read more)

Related Articles and Speeches from around the Fed

Many recent speeches by Federal Reserve officials have touched on the subject, and the Federal Reserve Bank of Cleveland has devoted an annual report essay and several working papers and Economic Commentaries to the topic.

  • August 04, 2009
  • On Systemically Important Financial Institutions and Progressive Systemic Mitigation
    • On Systemically Important Financial Institutions and Progressive Systemic Mitigation
  • One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation. Read more (PDF)
  • March 25, 2009
  • Forces for Economic Recovery
  • In remarks to the Regional Growth Partnership in Maumee, Ohio, Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto discussed the economic challenges facing both the U.S. economy and the regional economy; forces that will lead to economic recovery; and the Federal Reserve’s strategy for dealing with the challenges we are facing. Read more
  • August 01, 2008
  • Identifying and Resolving Financial Crises: A Conference Overview
  • Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will seize up? Are there viable alternatives? Will the intervention make further crises more likely? The Federal Reserve Bank of Cleveland and the FDIC sponsored a conference in April 2008 to debate and exchange ideas on these issues. The following document summarizes and ties together the contributions presented. (PDF)
  • June 01, 2008
  • Central Banks and Crisis Management
  • Fostering financial stability is a key role of a central bank. The Federal Reserve Bank of Cleveland's 2007 Annual Report reviews lessons from past financial crises that may help guide policymakers as they respond to future challenges. (PDF)

See all related articles

Financial Stability Reports

A variety of countries and international organizations produce financial stability reports. Links to many of them can be found on our financial stability reports page.

(See the full list of countries and find their reports.)