Financial Structure and Stability (Contributions to Economics)
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The FPC are the mechanics of the financial system, working to keep everything moving smoothly. They identify risks and flaws in the financial system, assessing how bad they might get and acting to remove or reduce them. View more. Skip to main content.
What is financial stability? A stable financial system is one that can provide crucial services to households and businesses in good times and bad. What role does the financial system play in the economy? It provides crucial services which keep the economy moving: It offers a way for us to make payments so we can buy and sell goods and services It allows us to manage and insure against risks It gives us a way to manage our savings It allows households and businesses to borrow money to invest and grow.
With a stable financial system, the wheels of the economy keep turning, even when the conditions get difficult. What happens when the financial system is unstable? How can the financial system be made more stable? The PRA are the safety engineers who regulate and oversee financial institutions. There are three elements which contribute to financial stability: A reliable mechanism must be built with a strong and well-designed structure.
Enhancing Financial Stability: The Role of Transparency
Financial institutions are expected to meet very high standards of resilience. The ability to change gears is necessary when the road gets tougher. Financial institutions must be able to adapt their level of resilience to new risks that might be developing. Credit Suisse strives to balance the interests of its shareholders and the concerns of the regulatory authorities, legislators and other stakeholders within society, while focusing on the needs of clients.
The global implementation of extensive regulatory reforms continued in with the aim of further reinforcing the stability and integrity of the global financial system. At Credit Suisse, we consider it important to actively help shape these new standards. For example, we contributed to a high-level dialogue with Swiss regulators and policymakers in regarding the introduction of the new Basel III regulations in Switzerland. In particular, we engaged with key policymakers and underscored the importance of ensuring that implementation is harmonized with the approach in other comparable financial centers to ensure a level playing field.
We also published the fourth edition of our study on the Swiss financial center. At the international level, we advocated regulatory cooperation to avoid fragmentation of global standards — both through our work in industry associations and through direct interventions. This included holding a conference in Brussels with key officials that included a fact-based report and analysis on the risks and costs of such an approach. Credit Suisse makes an indirect contribution to the economy in a variety of ways, including in our role as a consumer.
In , we purchased a total of CHF 5. The establishment of reliable relationships with these external partners helps to ensure the quality and value of the products and services we source. More information on Credit Suisse's relationship with our suppliers can be found at: credit-suisse.
Our role as a taxpayer is another way in which we contribute to society and ultimately to the economy. The bank is also subject to other taxes unrelated to income, which totaled around CHF 0. The importance of banks for the continued development and growth of the economy is demonstrated by our activities in our Swiss home market.
As the "Bank for Entrepreneurs", we are dedicated to serving private, corporate and institutional clients in Switzerland. We provide a broad spectrum of products and services — ranging, for example, from bundled product solutions for daily banking needs to more complex business succession planning or international business transactions.
In addition, we offer our entire expertise from across investment banking and wealth management to serve both the corporate and private financial needs of entrepreneurs. Credit Suisse is a trusted financial partner to more than , companies or around 1 in 3 businesses in Switzerland. One of our goals is to support these companies with a fair, competitive and risk-adjusted lending policy.
We are committed to providing our Swiss corporate clients with individual advice and the best possible support to help them run their businesses effectively, and we offer advice on strategic decision-making. In total, Credit Suisse had more than CHF billion of loans outstanding in Switzerland at the end of , including mortgages and loans to private companies, the public sector and private clients.
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Besides serving Switzerland's SMEs, Credit Suisse is also a longterm strategic financial partner to a number of multinational companies that are domiciled in Switzerland, providing them with a broad range of financial services and access to capital markets. In this way, we help to strengthen Switzerland's position as an attractive business location. In our home market of Switzerland, we not only engage in an open dialogue with politicians that involves the regular exchange of information and ideas but also actively support the functioning of the Swiss "militia" system of politics, where Swiss citizens assume roles in political bodies at federal, cantonal or community level alongside their regular professions.
Consequently, Swiss members of parliament are not professional politicians and the parties do not receive state funding. In the November Inflation Report , Norges Bank first published its own forecast for the interest rate for the next three years. The aim is to enhance the predictability of monetary policy.
With a predictable monetary policy, market participants can react to new information in a way that contributes to stabilising developments in output and inflation. We try to establish an interest rate path that provides a reasonable balance between the objective of stabilising inflation at target and the objective of stabilising developments in output and employment within a reasonable time horizon, normally 1 - 3 years. Interest-rate setting is also assessed in the light of developments in property prices and credit.
The results of this trade-off are published in the Inflation Report in the form of a chart that presents central projections for the interest rate, the exchange rate, inflation and capacity utilisation in the economy. Underlying inflation has been lower than projected in recent months. Nevertheless, several factors point to higher inflation ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy.
Employment is rising rapidly and unemployment has exhibited a marked decline. There are signs of higher wage growth and expectations of rising inflation. At the same time, the krone exchange rate has depreciated from strong values. Monetary policy influences the economy with a lag. Over several years, interest rates have been considerably lower than what we consider to be a neutral level. Against the background of high growth in output and employment, rising wage growth and a weaker krone, there are prospects of higher consumer price inflation ahead.
The interest rate may gradually be raised to a more normal level at a somewhat faster pace than envisaged earlier, although it is unlikely that rates will be raised at every monetary policy meeting. Based on our current assessment, the interest rate will thus continue to be raised in small, not too frequent steps. The forecasts are uncertain. They are based among other things on an assessment of the current situation and a perception of how the economy functions.
Disturbances to the economy may result in changes in the forecasts. Frequent data revisions imply that the current economic situation is not fully known. The chart illustrates the uncertainty surrounding the forecasts. The wider the fan chart is, the more uncertain the forecast. The uncertainty implies that the interest rate should normally be changed gradually, so that we can assess the effects of interest rate changes and take into account new information about economic developments.
Changes in forecasts are nothing new to financial market participants.
There is no reason to believe that Norges Bank will not also have to reassess its interest rate and other forecasts as new information emerges about economic developments. Our ambition must be to reduce uncertainty with regard to our own response pattern. Financial stability means that the financial system is robust to disturbances in the economy and is able to channel funding, execute payments and redistribute risk in a satisfactory manner.
Experience shows that the foundation for financial instability is laid during periods of strong growth in debt and asset prices.
Relevant SDG Indicators
Banks play a central part in providing credit and executing payments and are therefore important to financial stability. Monetary and financial stability are both important for economic developments. In my view, they are often mutually reinforcing. Financial stability can be seen almost as a prerequisite for price stability.
First, it promotes stable developments in financial markets, which is crucial to balanced economic growth. Second, financial stability supports the transmission mechanisms of monetary policy. Conversely, price stability has a positive influence on financial stability. A successful monetary policy will support financial stability by removing distorted price signals associated with high and volatile inflation.
What is financial stability?
Low and stable inflation provides households and enterprises with a clear indication of changes in relative prices, enabling them to make better informed decisions. Allocation of resources will then be more efficient. To promote efficient cooperation, the regular exchange of information between these authorities is crucial and a framework for cooperation has been established.
Kredittilsynet is responsible for supervising individual financial institutions, while Norges Bank analyses the stability of the financial system from a macro perspective, aiming at identifying developments that may lead to the build-up of excessive risk in the financial sector and the build-up of financial imbalances that may pose a threat to financial stability.