Conceptualization of financial system sustainability

Abstract

Analysis of financial sustainability is often limited to public finance sustainability, and sometimes also financial sustainability on a company level is distinguished. Further, public finance sustainability is frequently substituted with the term fiscal sustainability, describing the latter as the possibility of a government (country) to retain the current level of expenditure and taxes in long enough period at the same time not raising the increase in government liabilities, the threat for solvency of the planned expenditures and avoiding bankruptcy. The term of solvency is often stressed in defining fiscal sustainability. More particularly, sustainability of financial policy can be defined as a possibility of government to perform and continue the current policy not changing the provision of public services, taxation and avoiding the continuous increase of public debt to GDP ratio. There is no doubt that the issues discovered in a state-level perception of financial sustainability are of high importance. However, the perception of this term should not be limited only to public finance sustainability. A holistic point of view is needed where financial sustainability would be perceived as a power of financial system allowing to supply financial resources to three parts of financial system: the business, the public sector and individuals. Only the mentioned proposition allows to speak about efficient operation of a country as a whole and make relevant solutions with regard to the interests of all economic subjects.