Macroprudential analysis

Macroprudential analysis involves the regular review and analysis of cyclical and structural developments in the financial system and the macro-financial environment with the view to identifying, monitoring and assessing potential risks and vulnerabilities as well as assessing the system’s resilience to potential shocks. The main focus is on banks as they are the primary intermediaries of funds and also the most important potential channel for the propagation of risk in the financial system. At the same time, the increasing importance of non-bank financial institutions, financial markets and financial market infrastructures and their linkages with banks implies that vulnerabilities in these components of the financial system also need to be monitored. In parallel, macroprudential surveillance covers developments in the external and domestic macro-financial environment, which may have an impact on the stability of the financial system. This includes analysing macroeconomic conditions, outlook and risks as well as the financial condition of, and the risks facing, the household, non-financial corporate and real estate sectors.

Different tools and many sources of quantitative and qualitative information are used for performing macroprudential analysis. As part of the analysis, the capacity of the banking sector to withstand potential shocks is regularly assessed, primarily through the conduct of system-wide stress tests.