The Financial Stability Unit, formed in 2009, as a response to the global financial crises, sits in the Deputy Governor’s Office. It is responsible for ensuring Financial Sector Stability through macroprudential policy formulation and implementation, which promotes sound banking and non-banking financial institutions system, as well as encourage efficiency in financial markets. A stable and well-functioning financial system contributes significantly towards balanced and sustainable economic growth. This condition is therefore achieved when the risks and vulnerabilities affecting the financial system are mitigated as they are likely to negatively affect ‘real’ economic variables such as gross domestic product growth and unemployment, and may reduce public trust and confidence in the financial system.
Macroprudential analysis is forward looking by nature and this unit conducts assessment through the use of early warning system indicators and as well as the use of stress testing tools. The linkages in the various sectors of the economy and institutions are assessed for any vulnerabilities and systemic risks that may threaten the robustness of the financial system. These help the regulator monitor the system and inform policy makers on the appropriate interventions for financial stability.
