Communication for financial crisis prevention: a tale of two decades

This edition of the ECB’s Financial Stability Review (FSR) marks the 20th anniversary of its inaugural publication. The FSR was originally launched to help in preventing financial crises, and this special feature draws lessons from two decades of experience in identifying, analysing and communicating about systemic risks via this publication. Although risk analysis and risk communication are distinct processes, the special feature emphasises that they are inextricably intertwined in a seamless cycle where each informs and enhances the other. Effective risk identification is founded on the ability to combine structured, data-driven assessments with qualitative insights and expert judgement. Such an approach requires a comprehensive and adaptive framework that continuously integrates broad reviews of indicators with focused analyses on emerging risks. Early identification of vulnerabilities enables timely intervention, but the complex, non-linear way that the financial system functions means that flexibility remains essential. Clear and transparent communication of systemic risks supports this analytical process by shaping expectations and enhancing market discipline, creating a feedback loop that strengthens both policy response and risk awareness. However, central banks face the challenge of balancing communication frequency and depth in order to avoid false alarms while at the same time maintaining credibility. As the ECB’s FSR has evolved, it has sought to become more accessible and data-driven, while utilising diverse media channels to broaden its audience. Experience confirms that targeted, proactive communication reinforces financial stability by aligning policymakers and markets, underscoring the symbiotic relationship between risk analysis and effective communication in maintaining financial system resilience. JEL Classification: D81, E58, G01