Pillars of financial stability network

Pillars of financial stability network

First step: Crisis prevention (legislation and supervision)

This step is accomplished through developing prudential regulations and supervision.

In some countries performing this duty is borne by an independent institution (independent from the central bank). For example, in Australia, this responsibility is borne by the Australian Prudential Regulation Authority (APRA).

In some countries such as Iran also, a major part of this duty is borne by the central bank.

Second step: Protecting sound financial institutions that are facing shortage of liquidity.

Traditionally, In addition to codification and execution of monetary policy, central bank also takes this step as the lender of last resort.