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Definition of financial stability


According to the European Central Bank (ECB), 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 likelihood of disruptions in the financial intermediation process that are severe enough to significantly impair the allocation of savings to profitable investment opportunities" [ECB (2011), Financial Stability Review, December].