Financial stability and macroprudential policy

The ECB monitors developments in the banking sectors of the euro area and the EU as a whole, as well as other financial sectors, to identify any vulnerabilities and check the resilience of the financial system.

It carries out these tasks together with the other central banks of the Eurosystem and the European System of Central Banks.

The emergence of possible systemic risks in the financial system is addressed through macroprudential policies. The overarching goal of macroprudential policy is to preserve financial stability.

Definition of financial stability

Financial stability can be defined as a condition in which the financial system – which comprises financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances.

This mitigates the prospect of disruptions in the financial intermediation process that are severe enough to adversely impact real economic activity.

Explainer: Spotlight on financial stability

Macroprudential policies aim to:

• prevent the excessive build-up of risk, resulting from external factors and market failures, to smoothen the financial cycle (time dimension)
• make the financial sector more resilient and limit contagion effects (cross-section dimension)
• encourage a system-wide perspective in financial regulation to create the right set of incentives for market participants (structural dimension)

Contact groups

Banking Industry Dialogue Chief Risk Officer Roundtable Financial Stability Contact Group

Key publications

• Financial Stability Review
• Report on financial structures
• Financial integration in Europe
• Macroprudential Bulletin
• Results of the surveys on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD)
• All publications on this topic
• All press releases on this topic