Analysing Financial System Stability

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Nigeria Deposit Insurance Corporation (NDIC)

Introduction 6 3.0 Financial Stability Analysis, Macroprudential Supervision and Measuring System Risk 12 3.0 Contingent Claims Analysis 21 4.0 The Data and Empirical Analysis 29 5.0 Recommendations and Conclusions 36 References 40

The recent 2007-09 global financial crisis and the 2009 Nigerian near-financial crisis have emphasized the need for the analysis and integrated management of global and domestic financial systems. International standard setting institutions, like the Basel Committee for Banking Supervision and the International Monetary Fund (IMF), Central Banks Worldwide as well as the private sector have been working on a series of proposals so as to have a more stable and efficient financial system. The key initiatives pursued in this regard include measuring and managing systemic risk and the development and usage of macro-prudential policies that utilise macro-prudential indicators to ensure stability of financial systems. The overall aim of these two and several other initiatives are the measurement and strengthening of financial system stability.