Andrew Crockett: Monetary policy and financial stability (Central Bank Articles and Speeches)

It is an issue that is both important and timely. Important, because we need to ensure that arrangements for the pursuit of price stability do not inadvertently endanger the stability of the financial system. And we need to ensure that financial system weaknesses do not impede the effective operation of monetary policy. Timely, because the new Basel Capital Accord is focussing additional attention on the issue of systemic risk. Moreover, in a number of countries, responsibility for the supervision of financial institutions has been moved from the central bank to an independent regulatory authority, with the central bank itself retaining a more general responsibility for overall systemic stability. Australia and the United Kingdom are perhaps the clearest examples of such a shift, but similar moves have taken place in Korea, Hungary and a number of other countries. These institutional changes have sparked a lively debate about the appropriate institutional framework for monetary and financial stability policies.