Bank for International Settlements Financial Stability Institute publishes stocktake on how authorities measure and use financial health metrics

The Bank for International Settlements Financial Stability Institute published an FSI Insights paper taking stock of how seven national financial authorities define, measure and monitor “financial health” and how those metrics feed into programmes and policy interventions. The paper frames financial health as a multidimensional outcome that sits alongside, but goes beyond, financial inclusion and financial literacy, and notes that financial authorities can influence it through inclusion initiatives, consumer protection and prudential regulation, and education efforts. Drawing on desk research and interviews, the stocktake covers the Australian Securities and Investments Commission, the Central Bank of Brazil, the Financial Consumer Agency of Canada, the Central Bank of Jordan, the Central Bank of Kenya, the UK Money and Pensions Service and the US Consumer Financial Protection Bureau. It finds that approaches differ on whether authorities use a single index or multiple measures, but all rely mainly on survey-based data combining subjective and objective elements, with varying frequency and sample size that affects comparability and depth. Financial health information is primarily being used to target consumer education and protection, and some authorities are exploring additional applications such as informing firms’ internal risk assessments and product targeting, strengthening conduct regulation and providing prudential and supervisory insights into risk-taking, potential misconduct and competition issues; the paper also highlights challenges around survey representativeness and data quality and notes interest in complementing surveys with more objective data sources.