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Financial stability nearly impossible, say experts.

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Vincent
PositionRisk Management - Brief Article

Corporate scandals and plummeting share values may have prompted louder calls for regulation and transparency, but financial stability is exceptionally difficult, if not impossible, to achieve, according to speakers at the 20th Symposium on Banking and Monetary Economics.

"Compared with price stability, financial stability is a mess," said Charles Goodhart, professor of banking and finance at the London School of Economics. "It's not difficult to do something with price stability, but it's a multitude of times harder to do the same for financial stability"

Conventional risk assessments and stress tests were too primitive, he argued. Questions such as "could your firm survive this type of shock with your existing portfolio?" didn't take into account whether the event was likely to take place over six months or overnight, even though this factor should make a huge difference to the response.

Michael Foot, managing director...

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