The guiding theme of the chapters in this part of the book is that the procyclicality of the financial system provides an organizing framework for selecting indicators of vulnerability to crises, especially those that are associated with banks and financial intermediaries. In addressing the procyclicality of the financial system, it is useful to distinguish between the core and non-core liabilities of the banking sector. Core liabilities can be defined as the funding that the bank draws on during normal times and that is (mainly) sourced domestically. When banking sector assets are growing rapidly, the core funding available to the banking sector is likely to be insufficient to finance the rapid growth in new lending. This is because retail deposits grow in line with the aggregate wealth of the household sector. In a lending boom when credit is growing very rapidly, the pool of retail deposits is not likely to be sufficient to fund the increase in bank credit, and other sources of funding must then be tapped. The state of the financial cycle is thus reflected in the composition of bank liabilities.