Management of Risks to Financial Stability from the Perspective of a Central Bank

Gabriela Latea
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Gabriela Latea: Romanian Academy School for Advanced Studies of the Romanian Academy

Finante - provocarile viitorului (Finance - Challenges of the Future), 2016, vol. 1, issue 18, 132-140

Abstract: This article investigates the main issues pertaining to a central bank’s concerns relative to financial stability, as seen from the perspective of risks, sources and key ways of action. At macroeconomic level, central banks need to identify and monitor the risk that market operators face payment default towards local entities (companies, households, government) and/or foreign creditors. Moreover, central banks entrusted with supervisory and licensing tasks are also carefully examining the various risks threatening banks, be they credit risk, liquidity risk, market risk, or risks associated with exposure concentration and distribution. On financial markets, prices, profit margins, interest rates, net exposure to certain financial instruments must be monitored to be able to identify build-ups of risks, stress and significant drawbacks to its adequate functioning. Adding to these is the Contingent Claims Analysis (CCA ), which involves oversight and assessment of risks in various sectors as well as of the needs to counter them, by drawing on the real market data to identify the probability of default in one sector or another and the impact on other sectors in an integrated manner.

Keywords: risks; financial stability; central bank (search for similar items in EconPapers)
JEL-codes: E58 G21 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:aio:fpvfcf:v:1:y:2016:i:18:p:132-140

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