They conduct monetary policy to achieve low and stable inflation and, as recognised by the International Monetary Fund (IMF), “are well placed to conduct macroprudential policy because they have the capacity to analyse systemic risk.”2 The global financial crisis provided evidence of the need to contain risks to the financial system as a whole through dedicated financial policies.
Against this background, many central banks that also have a mandate to promote financial stability have upgraded their financial stability functions, including by establishing macroprudential policy frameworks.3 But to work effectively, macroprudential policy needs a strong institutional foundation.