1) A resilient financial system is one that can adapt dynamically to major changes while continuing to function in a modified way. 2) To measure resilience for policy assessment, quantitative scores are needed to evaluate policies both before and after implementation. 3) Measuring resilience in practice involves defining the components and characteristics of resilience for each sector and the overall system, and creating composite indicators from relevant data sources.

1. Francesca Campolongo
Head of Economic and Financial
Analysis Unit, Institute for the
Protection and Security of the Citizen
European Commission Joint Research
Centre
Serving society
Stimulating innovation
Supporting legislation
Joint IEA/ISI Strategic Forum 2015 and
High-Level Expert Group on the
Measurement of Economic Performance
and Social Progress Workshop
Measuring economic, social and
environmental resilience
25-26 November 2015, Rome

2. Creating a framework for measuring
resilience
What is a resilient financial system?
A system which is able to adapt dynamically to major
changes while continuing to function, albeit in a
modified way
Policy makers need a quantitative measure (a
score) for ex ante & ex post policy assessment

3. 3
How to measure resilience (in practice) ?
 Define the components/characteristics of resilience
for each sector and for the system as a whole
 Create an aggregate measure (composite
indicator) for policy use
 Define the main actors/agents/sectors
 Define the indicators

4. 4
Some examples for the financial system
The agents, the components and the indicators
AGENTS COMPONENTS INDICATORS
Banks Liquidity • Short-term liquidity
ratio (LCR)
• Long-term liquidity
ratio (NSFR)
Capitalization • Tier 1 capital
• Capital adequacy
ratio
... • ...
Insurance
companies ...
Other Financial
intermediaries
...
...
Overall system
Composite
Indicators

5. 5
- Highly complex and opaque
- ……
Some vulnerabilities of the financial system
- Highly interconnected
- “Too big too fail” institutions
- Over-leveraged
Network analysis helps
understanding the complexity

6. 6
What about other financial insititutions ?
Insurances, pension
funds, other financial
intermediaries play a
key role
... and are all highly
interconnected

7. 7
The interaction with the real economy
A financial system more resilient which still promotes
economic growth

8. 8
 Based on good data
- Micro data to capture the system complexity
- Integrated data from different sources
- Quantitative & qualitative data on behaviors
The indicators
 Measuring how the system evolves
and absorbs shocks

9. 9
Indicators for resilience need to be
based on constantly updated data
Extending the ISTAT work to other
sectors and/or countries
The way forward

10. 10
Conclusions
Building a framework for measuring resilience:
challenging but important!
We need experts, data, and scientific competences

11. Thank you for your attention!