Financial stability has gained increasing attention in the last decade. Especially central banks substantially increased their efforts – and instruments – in order to contribute to the stability of the financial system. Despite this increasing interest in financial stability, there does not exist an unambiguous definition of it. The following three chapters present issues related to financial stability where the focus lies on the stability of the banking system. Chapters 2 and 3 address the issue of enhancing transparency in the banking sector and its impact on financial stability. Calls for enhancing transparency in the banking sector have been prompted regularly after financial crises. Chapter 2 shows – first – why and how transparency has become an issue in the current debate on banking supervision and banking regulation. Second, it provides an overview over relevant economic literature on the impact of transparency on financial stability. While in the public discussion, enhancing transparency is generally believed as being beneficial, the literature on transparency in the banking sector points to a possible trade-off with respect to the disclosure of information about banks: on the one hand, transparency might increase financial stability via market discipline. By providing information about a bank's risk profile, depositors and investors are able to demand adequate compensation and might thereby induce banks to choose lower risk levels. On the other hand, enhancing transparency might also be detrimental for financial stability by leading to (inefficient) bank runs. Chapter 3 provides a theoretical model where banks – under some circumstances – might be tempted to be more transparent than preferred from a financial stability point of view. While banks want to disclose information on the actual situation in order to reduce funding costs in times of crisis, complete intransparency would be preferred from a financial stability regulator in order to avoid inefficient bank runs. The latter occur in this model due to the incentive scheme of a deposit contract: the payoff scheme of a standard deposit contract has limited upside gains (cap) but leaves the depositor with the downside risk. Depositor do therefore not take into account possible future upside gains of the bank when deciding whether to run the bank or not. Chapter 4 focuses on the relation between financial stability and the macroeconomy (an earlier version of this chapter was co-authored with Josef Perrez). Concretely, it analyses the extent to which an internationally integrated banking sector, the Swiss banking sector, is interlinked with important domestic macroeconomic variables for the period 1987-2012. Using a VAR framework, the following results are obtained: First, a deterioration in the banking sector's condition – measured by a continuous index capturing the level of stress in the banking sector at a given point in time – is followed by a deterioration in GDP. This result might – second – mainly be driven by banking sector instability. Third, the findings suggest that there exists a "credit channel" transmitting banking sector shocks to the real economy. Finally, a downturn in the Swiss economy adversely affects the domestically oriented banks in the system. The impact of GDP on the overall banking sector – however – is diluted by the size of the two large Swiss banks due to their internationally oriented business model.weiterlesen