With this in mind, for instance, we at the Bank of Italy have been gradually reducing the average size and holding period of our active positions in foreign reserve management, while increasing the frequency of trades. Furthermore, we reinvest large bond redemptions by distributing purchases over an entire trading session.
Put differently, financial stability implies that key institutions in the financial system are operating without significant difficulty and markets are generally functioning well. Bankers implicitly accept risk as a consequence of providing services to customers and also take explicit risk positions that offer profitable returns relative to their risk appetites.