Financial stability cannot be preserved without visibility. As financial systems grow more complex, interconnected, and adaptive, vulnerabilities increasingly accumulate quietly—across institutions, markets, technologies, and borders—often without triggering conventional alarms. In such systems, governance without diagnostics operates in partial darkness.
Diagnosing Financial Ecosystems addresses the question that follows once design and governance are explicit: how do systemic vulnerabilities become legible to governance before stress materializes? This third volume of the Financial Ecosystem Stewardship Series reframes diagnostics not as a technical toolkit or early-warning device, but as a system-level interpretive function essential to stewardship under uncertainty.
What this report does
This volume establishes diagnostics as a distinct and indispensable function within financial ecosystem stewardship. In particular, it:
- Defines diagnostics as interpretation rather than measurement, organizing fragmented signals into coherent patterns
- Explains why data abundance does not produce legibility, and how precision without structure can obscure fragility
- Maps how vulnerabilities arise, interact, and migrate across the five layers of the financial ecosystem—information, infrastructure, innovation, integration, and governance
- Shows how stability itself can mask brittleness, allowing fragility to accumulate during tranquil periods
- Clarifies the role of diagnostics in disciplining attention, escalation, and accountability, without substituting for judgment or decision-making
Rather than predicting crises or prescribing interventions, the report explains how diagnostics make emerging fragility visible, discussable, and governable—preparing stewardship without claiming foresight.
Position within the Financial Ecosystem Stewardship Series
Diagnosing Financial Ecosystems is the third volume in the Financial Ecosystem Stewardship Series developed by Bank & Finance Consulting Group.
The series treats financial stability as a problem of stewardship under irreducible uncertainty, organized sequentially as:
- Design — defining the architecture and trade-offs of the financial ecosystem
- Governance — stewarding coherence under fragmented authority
- Diagnostics — making systemic vulnerabilities legible to governance
- Stress Testing — exploring how vulnerabilities behave under strain
- Institutionalization — preserving judgment and capacity over time
This volume occupies the critical bridge between governance and stress testing. Diagnostics do not decide or act; they prepare governance for exploration under strain by clarifying what matters and why.
Intended audience
This report is addressed to readers responsible for system-level financial outcomes, including:
- Central banks and financial supervisory authorities
- Finance ministries and macro-financial policymakers
- Multilateral development banks and international organizations
- Senior decision-makers concerned with systemic resilience and institutional capacity
It assumes familiarity with financial stability concepts and focuses on structural reasoning, interpretation, and judgment, rather than technical modeling.
Why this matters
Repeated crises have shown that systemic vulnerability is rarely invisible—only unintelligible. Fragility often accumulates not from ignorance or rule-breaking, but from interaction, drift, and delayed collective interpretation. By treating diagnostics as a public good that enables coordination and accountability across fragmented authority, this volume shifts attention upstream—from reaction to preparedness.
Diagnosing Financial Ecosystems establishes a necessary condition for stewardship: legibility. Understanding how diagnosed vulnerabilities behave once the system is strained is the task of the next volume in the series, Stress Testing Financial Ecosystems.
Read the full report:
Diagnosing Financial Ecosystems: Making Systemic Vulnerabilities Legible to Governance
