What does financial stability mean?

"Financial stability" is a solid, well-functioning financial system that facilitates the proper operation of the economy and is robust enough to absorb and counteract financial shocks resulting from disappointing and unexpected events.

In practice, this means ensuring:

• Stable prices (the absence or near absence of inflation or deflation),
• A well-functioning, efficient payment system,
• Solid financial institutions, monitored by good supervision.

Financial stability is essential to maintain confidence in the financial system and to prevent disruptions in the financial sector from spreading to the wider economy.