Financial stability is a state where the financial sector as a whole is able to smoothly fulfil its basic functions even at times of major negative shocks in either the external or domestic economic and financial environment. Financial sector stability is correspondingly seen as a prerequisite for the healthy functioning of the real economy, while the behaviour of the financial sector should not deepen the economic cycle. The National Bank of Slovakia contributes to the stability of the financial system as a whole, principally by exercising supervision over financial market.   While financial stability is contingent on the financial health and sound internal processes of financial institutions, it is also significantly affected by other financial market participants – non-financial corporations, households and government – as well as by the legislative and regulatory environment. For this purpose, the National Bank of Slovakia publishes twice yearly a Financial Stability Report, which is concerned primarily with identifying the main risks to the stability of the financial sector in Slovakia.