Threats to Financial Stability Require New Responses from Central Banks, Private Sector: C.D. Howe Institute



    TORONTO, Nov. 15 /CNW/ - Financial crises are not new - yet in recent
years the combination of serious macroeconomic shocks and financial crises has
worsened in magnitude and frequency, and recent trouble in credit markets is
hardly reassuring. Against this backdrop, central banks and the private sector
should pay increased attention to who should maintain financial stability and
how, says a new study from the C.D. Howe Institute. In Financial Stability:
What It Is and Why It Matters, authors Charles Freedman and Clyde Goodlet,
former senior officials with the Bank of Canada, examine the current
challenges to financial stability and the roles that central banks, other
public sector agencies and private sector entities can play in pursuing it.
    Many central banks have increased the attention that they pay to
financial stability. As in the past, they stand ready to advance funds to
banks facing liquidity issues, and many are now also active in overseeing
critical clearing and settlement systems and publishing frank assessments of
their countries' financial stability. These financial stability reports are
aimed at informing the private sector, which in the past has been
insufficiently involved in issues that did not immediately bear on the bottom
line.
    There are dangers in central banks becoming too interventionist,
including the possibility of creating conditions that would support
dangerously risky behaviour in private markets, say the authors.
    The study, Financial Stability: What It Is and Why It Matters, is
available at <a href="http://www.cdhowe.org/pdf/commentary_256.pdf">http://www.cdhowe.org/pdf/commentary_256.pdf</a>.




For further information:

For further information: Finn Poschmann, Director of research, C.D. Howe
Institute, (416) 865-1904, Email: cdhowe@cdhowe.org


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