FINANCIAL SYSTEM STABILITY

DEFINITION OF FINANCIAL SYSTEM STABILITYFinancial System Stability (SSK) is actually not yet have a standard definition that has been accepted internationally. Therefore, there are several definitions of SSCs which basically says that the financial system entered a phase of unstable when the system is dangerous and hamper economic activity. Below are quoted some definitions SSCs are taken from various sources:"The financial system is stable and able to allocate financial resources to absorb shock (shock) that occurs so as to prevent disruption to the activities of the real sector and financial system.""The financial system is a stable financial system is strong and resistant to various economic problems that remain capable of performing the intermediary function, carry out payment and a good spread of risk.""Financial system stability is a condition in which the economic mechanism in pricing, allocation and risk management function and sustained economic growth."Meaning of financial system stability can be understood by doing research on the factors that could cause instability in the financial sector. Instability of the financial system can be triggered by various causes and turmoil. This is generally a combination of market failure, either due to structural and behavioral factors. Failure of the market itself can be sourced from external (international) and internal (domestic). Risks that often accompany the activities in the financial system, among others, credit risk, liquidity risk, market risk and operational risk.The increasing trend of globalization of the financial sector, supported by technological developments led to the financial system becomes increasingly integrated with no lag time and boundaries. In addition, the innovation of financial products increasingly dynamic and diverse with a higher complexity. Addition to these developments could lead to the sources of instability of the financial system increased and more diverse, it can also lead to increasingly difficult to overcome such instability.Identification of sources of financial system instability generally more forward looking (looking ahead). It is intended to determine the potential risks that will arise and will affect the future condition of the financial system. On the basis of the identification results are then analyzed to what extent the risk of potentially more insidious, widespread and systemic so as to paralyze the economy.