What is financial stability? And what does the Central Bank do to mitigate risk?

Financial stability means that a financial system can withstand shocks in the economy and financial markets, guarantee capital, mediate credit and payments, and spread risk appropriately.

• The Central Bank sets various rules for financial institutions, in addition to the laws and regulations that apply to their operations, which are designed to reduce risk.
• The Central Bank closely monitors the operations of financial institutions to assess whether any risks may be imminent and responds if necessary.
• Examples of rules include regulations on equity and capital buffers, foreign exchange balances, liquidity and stable funding for financial institutions, and rules that limit the risk that borrowers may take, such as restrictions on loan to value ratios for housing purchases and debt service burden on mortgages in relation to income.