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Financial System Stability is a condition in which the economic mechanisms in pricing, allocation of funds and risk management function properly and support economic growth, or it can also be interpreted as avoiding a country from monetary or financial crises. There are also several other definitions that might also add to your understanding. The first is defined as stated below “A stable financial system is able to allocate sources of funds and absorb shocks that occur so as to prevent disruptions to real sector activities and the financial system.”