Financial Stability. General Information

Macroprudential Policy Framework

What is financial stability?

Financial stability is a state, under which the National bank, banks and non-bank financial institutions, JSC “Development Bank of the Republic of Belarus”, insurance companies, professional security market participants, other providers of financial services, the financial market and the payment system of the Republic of Belarus are functioning efficiently and uninterruptedly and preserve the possibility to perform their functions in case of a destabilizing impact of internal and external factors.

In other words, financial stability means a stable functioning of the financial system. In turn, financial stability maintenance means a prevention of financial stability violations (appearance of financial crises) and effective resolution of crisis situations in the financial system with minimal losses for it and the economy.

Why is financial stability important?

Financial stability is a key prerequisite and necessary condition for the low level of inflation and unemployment, as well as a sustainable economic growth and development. This is due to the fact that in modern economy such tasks cannot be solved without the help of a developed and stable financial system, which is an effective guide for transferring monetary policy measures to other sectors of the economy.

The National Bank’s role in maintaining and ensuring financial stability

According to the Banking Code of the Republic of Belarus and Decree of the President of the Republic of Belarus No. 78 dated February 23, 2016 the National Bank in concert with the Government of the Republic of Belarus shall carry out monitoring of financial stability, and the Chairman of the Board of the National Bank shall be personally responsible for ensuring financial stability in the country.

The monitoring of financial stability refers to a surveillance of banks and non-bank financial institutions, other financial intermediaries, financial markets, payment system in the exercise of activities inherent thereto and their ability to carry out such activities in case of destabilizing influence of internal and external factors, as well as a comprehensive analysis of factors, which have an impact on preserving financial stability.

The main objective of financial stability monitoring is to identify and assess threats to a sustainable functioning of the banking sector and financial system vulnerabilities. Financial stability monitoring is the basis for the development of specific measures aimed at ensuring financial stability.

The tasks of financial stability monitoring are the following:

  • identification of factors having a negative impact on the financial system;
  • assessment of risks and vulnerabilities of the financial system;
  • development of recommendations on measures to ensure financial stability; and
  • advance provision of information to concerned parties on the potential risks to financial stability.

Financial Stability Council

The Financial Stability Council, which is a permanent collegial body created to coordinate activities aimed at ensuring financial stability, was established in accordance with Joint Resolution of the Council of Ministers and the National Bank of the Republic of Belarus No. 454/6 of June 13, 2016. The Council includes employees of the National Bank, Ministry of Finance and Ministry of Economy.

The main tasks of the Council are the following:

  • organization and coordination of the financial stability monitoring in the Republic of Belarus;
  • a comprehensive analysis of factors affecting the preservation of financial stability;
  • development and coordination of the implementation of measures aimed at ensuring financial stability;
  • development of mechanisms for resolving crisis situations in the financial market; and
  • coordination of activities of the authorized government agencies in the field of regulation and supervision in the financial market.

With a view to performing these tasks, the Council created three committees (a working committee on assessing the financial stability and developing measures for its maintenance, a working committee on developing mechanisms for resolving crisis situations in the financial market, and a working committee on coordinating approaches to regulation and supervision), which carry out the elaboration of issues at the expert level within the competence of the Council, as well as preparation of analytical materials and draft decisions for their further consideration at the meetings of the Council.