Stab fin

Financial Stability and Macro-Prudential Surveillance

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In addition to price stability, one of the fundamental missions of the Banque centrale du Luxembourg is to safeguard the stability of the financial system.

Price stability and financial stability are two closely intertwined concepts. Price stability facilitates financial stability through the fixing of agents’ expectations and, consequently, helps to reduce market volatility. Conversely, preserving financial stability is also important as instability and stress in the financial system can impair price stability by adversely affecting monetary policy transmission channels.

The mission attributed to the European System of Central Banks (ESCB) concerning financial stability is twofold. On the one hand, the aim is to contribute to policies initiated by the competent authorities with regard to the prudential supervision of credit institutions and to the stability of the financial system and, on the other hand, to promote the smooth functioning of payment systems.

This section expands upon the definitions of the main concepts related to financial stability, the mandate as well as the research and analyses activities of the Banque centrale du Luxembourg and, lastly, the nature of the institutional cooperation at the national, European and international levels.

  • Main concepts
    Financial stability and systemic risks are corollary and remain multidimensional economic notions, where at present no definition or quantification has been commonly accepted. (...)
  • The BCL mandate in financial stability
    The BCL's mandate regarding financial stability is fixed in national legislation as well as in the European Treaty in virtue of its participation in the Eurosystem (...)
  • The European system of financial supervision
    Following the proposed recommendations of the High-Level Group chaired by Jacques de Larosière, a new European Financial Surveillance System (EFSS) was established on 1 January 2011 (...)
  • Cooperation in the field of financial stability
    The increasing integration of the financial markets in the last years led to the emergence of a world market where the financial institutions operate in a cross-border manner. This process has been emphasised by the financial European integration and the development of the Internal Market. (...)
  • Research and analyses
    In regard to financial stability, two types of publications can be mentioned: the Financial Stability Review and Working Papers (...)