Conclusion This speech presents a step towards a broad conceptual framework for promoting financial system stability and guiding the Bank's policy actions. We argue that the preconditions for financial stability exist when all financial system risks are being adequately identified, allocated, priced and managed. The financial system is made up of markets, institutions, and payments and settlement systems.
Financial system risks broadly include credit, liquidity, market and operational risks. All of the preconditions are important to best ensuring that the financial system is resilient to a wide range of economic and financial shocks, and able to absorb financial crisis losses with least disruption.