Since commercial banks are crucial players in the financial system, efforts to improve their risk management can help mitigate the impact of shocks on the financial system and the real economy. Further, in order to foster the stability of the financial system, we need to support the resiliency of our financial infrastructure and promote sound supervisory oversight.
Despite a number of notable shocks, financial markets have generally remained stable in recent years. Investors currently seem optimistic about the economic and financial outlook, with risk spreads relatively narrow and implied volatilities fairly low. Businesses have been reporting strong profits and solid balance sheets. Financial market functioning has remained good, with most measures of financial market liquidity remaining within typical ranges.