Assessing Financial Stability: Exploring the Boundaries of Analysis

Within the context of a practical framework for safeguarding financial stability - entailing both prevention and resolution - this paper discusses the practical boundaries and challenges of assessing financial stability. The paper characterises the financial stability challenge, discusses concepts and definitions essential for safeguarding stability, and puts forward a practical process (but not a blueprint) for assessments. The paper proposes guidelines for disciplining an assessment process, examines measurement and modelling ambiguities, and identifies areas where significant further progress is necessary.