Financial stability can be defined as the ability of a financial system to perform its essential function – an efficient and reliable flow of funds among various economic actors. In a broader sense, the financial stability of a country implies a stable financial system sufficiently resilient to a potential stress and systemic shocks such as economic crisis.
Financial stability is important as it enables institutions and individuals to plan their future and invest their funds with confidence. The significance of preserving financial stability is best observed in enormous financial, economic and social costs occurring in times of an unstable financial system. Therefore, safeguarding the stability of the financial system has the character of a public good and presents one of Hanfa’s two main objectives pursuant to the Act on the Croatian Financial Services Supervisory Agency (Official Gazette, No 140/05 and 12/12).
The maintenance of financial stability of involves a series of ongoing activities relating to timely measurement of systemic risks by using various tools, reporting to the general public through regular publications, development and implementation of macroprudential policy aimed at strengthening the resilience of the system or addressing detected vulnerabilities, and effective cooperation with other institutions in charge of promoting the stability of the financial system.
Along with the Croatian National Bank, the Ministry of Finance and the Croatian Deposit Insurance Agency, Hanfa is responsible for the stability of the financial system in the Republic of Croatia, while the European Systemic Risk Board (ESRB) is in charge of its macroprudential supervision at the EU level.