Financial stability & market analysis

The Reserve Bank has a number of functions and powers and undertakes a number of activities for "financial stability" purposes. We assess and report on financial stability issues in our six-monthly Financial Stability Report.

The Bank's work under this heading covers a wide field of analysis. The inherent soundness of the financial system as a whole, and its capacity to absorb `shocks' from various sources (including from abroad and the real economy), are the focus of our work on financial stability. Understanding and analysing interactions among the various components of financial institutions, markets, and the rest of the economy is crucial to promoting the maintenance of a sound and efficient financial system.

We monitor financial stability in a number of ways. We undertake ongoing analysis and surveillance of trends and developments in financial institutions and markets, mainly from the standpoint of assessing whether they are consistent with maintenance of financial resilience through a range of economic conditions. Information about how financial institutions and markets function - domestically and globally - and pricing, volumes and flows of financial instruments, provide insights into financial system robustness. We also assess the robustness to shocks of the various sectors of the economy, such as households, the corporate and government sectors.