Prague Economic Papers 2008, 17(2):127-142 | DOI: 10.18267/j.pep.325

Indicators of financial system stability: towards an aggregate financial stability indicator?

Adam Geršl1, Jaroslav Heřmánek2
1 Czech National Bank, Prague, and Institute of Economic Studies, Charles University in Prague (adam.gersl@cnb.cz).
2 Czech National Bank, Prague (jaroslav.hermanek@cnb.cz).

This article sets out to describe and discuss the methodology of selected financial soundness and financial stability indicators, including the attempts to construct an aggregate financial stability indicator. The first part is devoted to discussion of Financial Stability Indicators by the International Monetary Fund and presents also the values of the IMF's core Financial Soundness Indicators for the Czech Republic and other selected countries, using the data from the 2005 pilot study. This part partly covers also other existing approaches to definition and collection of partial financial soundness indicators, such as the indicators regularly assessed by the European Central Bank. In the second part, the article reviews existing approaches to construct an aggregate financial stability indicator. These include alternative approaches using balance sheet and profit and loss data, as well as financial market and regulatory agencies' data. The last part constructs a preliminary composite indicator for the stability of the Czech banking system and discusses its development over time.

Keywords: financial stability, banking system, aggregation
JEL classification: C43, G21

Published: January 1, 2008  Show citation

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Geršl, A., & Heřmánek, J. (2008). Indicators of financial system stability: towards an aggregate financial stability indicator? Prague Economic Papers, 17(2), 127-142. doi: 10.18267/j.pep.325
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