Factors Affecting the Financial Stability

Topics: Economics, Unemployment, Investment Pages: 2 (463 words) Published: October 10, 2012
Factors affecting the stability financial system
Stability of financial system :
Introduction : financial stability can be defined as a condition in which the financial system – comprising of financial intermediaries, markets and market in structures – is capabilities with understanding shocks ,there by reducing the likelihood of disruptions in the financial intermediation process which are severe enough to significantly impair the allocation of savings to profitable investment opportunities. financial system stability(FSS) does not in fact have any standard international definition. Factors affecting the stability financial system

There are various factors which affect the stability of financial system are as follows * social factors
* legal factors
* economic factors
* political factors
* technological factors

social factors :
the social factors of a nation determine the value system of the society which, in turn affects the functioning of the financial system. Sociological factors such as costs structure, customs and conventions, cultural heritage, view toward wealth and income and scientific methods, respect for seniority ,mobility of labor, etc.,have far- reaching impact on the financial system. these factors determine the work culture and mobility of labor, workgroups, etc. thus, social factor includes living pattern of a nation. It decades the population composition of the country .thus financial system is highly influenced by these factors. legal factors :

these can be simply described as the laws and regulations that financial system has to follow. It includes : i. taxation system
ii. SEZ and EPZ concept
iii. Regulatory system
iv. International laws and regulations,etc.

Non-compliance of above regulations may impose fines and penalties on financial system. i. Trade business cycles
ii. Monetary policy
iii. Fiscal policy
iv. Currency exchange rates
v. Corporate activity
vi. Unemployment...
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