Second Meeting of the Financial Stability Council in 2016

The second meeting of the Financial Stability Council in 2016 was held on Wednesday, 18 May, in the Ministry of Finance and Economic Affairs. At its meeting the Council reviewed the main risk factors in the financial system and the report of the Systemic Risk Board to the Financial Stability Council. Overall risk in the financial system has decreased since the last meeting of the Financial Stability Council. At this time, the most significant risk factors are signs that the economy is heating up, which in the longer term could increase the risk of financial instability; volatility in international markets, which could affect the access of domestic banks to foreign credit markets; and greater inflows of capital, which could encourage higher leverage of domestic parties and reduce their resilience in a downturn.

The following matters were on the meeting agenda: Quarterly assessment of the counter-cyclical buffer, application of capital buffers and indicators for the second intermediate objective for financial stability, which according to official policy is to prevent immoderate maturity mismatch and liquidity shortage, especially in foreign currencies.

The assessment of the current economic situation was not regarded as giving cause to alter the counter-cyclical buffer, which will therefore remain unchanged from that of the previous meeting at 1%. The Council approved three core indicators which will be used as a basis for the second intermediate objective for financial stability. These are: i) the deposits-to-lending ratio, ii) the ratio of liquid assets to total assets and iii) the ratio of core funding to total funding.

The next meeting of the Financial Stability Council will be held on 10 June 2016.