DAFM and Financial Stability

One of DAFM’s main goals has long been to promote a stable financial system. The financial system plays an important role in the economy. A solid and efficient financial system is necessary for the economy to function and grow. A serious crisis in the financial system could cause extensive costs for the economy and society. Firms themselves neither have a sufficient overview of nor face adequate incentives to fully manage the risks for the system as a whole. The government and other authorities must therefore take an active role. DAFM contributes directly to the work of major international institutions charged with safeguarding financial stability at European or global level.

What is the role of a Financial Stability Reports?

An FSR makes reports on macroeconomic conditions of the state : development and inflation, exchange rates, trade, transactions, fiscal and monetary policies, and the impact of the global economy on the home market. These elements play an essential role and strongly affect the health and perspectives of the financial system, its credit activities, profitability and potential for large loan or payment problems.
Capital markets also play an expanding role in many economies. The FSR reports on a wide range of markets : equity, debt, derivatives, currencies, commodities, repos and commercial paper.
Each Financial Stability Report provides valuable insight into a country’s local financial system. These insights are reinforced by cross-country comparisons and an understanding of the key trends and concerns in the global financial system.

Stability Reports

Financial stability requires cooperation between different authorities and policy areas, which in turn requires a clear distribution of responsibility in order to create correct and realistic expectations of what DAFM and other authorities are able to do and should be doing. This applies to activities that prevent crises and manage crises that may still arise.
DAFM must describe and analyse twice a year the stability of the financial system, the risks posed to stability and conceivable measures to mitigate these risks. The analyses are based on what is happening both at the level of individual firms and in the economy at large. It is mainly in this interplay that stability risks arise. The report assesses financial stability and describes the status of the financial markets. It also provides an account of lending and lending terms and conditions to corporates and households.