High levels of public and private debt can pose risks to the overall financial stability of a country

or economy. Public debt refers to the amount of money that a government owes, typically
through borrowing from individuals, institutions, or other countries. Private debt, on the other
hand, refers to the debt accumulated by individuals, households, or businesses.

Risks of High Debt Levels:

1. Difficulties in making repayments can lead to defaults and financial crises.

2. High debt levels can limit the ability to invest in productive activities, hindering long-
term economic growth.
3. Excessive debt makes an economy more vulnerable to economic shocks.

Role of Regulation in Financial Stability:

1. Regulations aim to monitor and control the activities of financial institutions to ensure
their safe and sound operation.
2. Regulations help reduce the likelihood of financial crises and protect consumers.
3. Regulatory authorities enforce standards for lending and borrowing to prevent excessive
debt accumulation.

Measures to Mitigate Systemic Risks:

1. Implement prudent fiscal policies to control public debt levels.

2. Enforce stricter lending and borrowing standards to prevent individuals and businesses
from taking on excessive debt.
3. Improve financial literacy and consumer protection to enable informed decision-making
regarding debt management.

By addressing these points, countries can work towards maintaining financial stability
and reducing the risks associated with high levels of debt.