Searching for a Metric for Financial Stability

In the ECB Financial Stability Review (December, 2005, p.131), it is stated bluntly that there is no obvious framework for summarising developments in financial stability in a single quantitative manner. This is, to say the least, a considerable disadvantage when attempting to analyse financial stability issues. As the same ECB Special Feature on `Measurement Challenges in Assessing Financial Stability`, put it, Financial stability assessment as currently practiced by central banks and international organisations probably compares with the way monetary policy assessment was practised by central banks three or four decades ago - before there was a widely accepted, rigorous framework.