But the BIS report suggests that the side effects of doing so could run counter to achieving other high-level objectives, including reducing interconnectedness, reducing procyclicality and reducing uncertainty. The challenge is getting the balance right so that fixing one problem does not create another one.
A second example of where tension between objectives is evident is in the effort to increase the stability of banks’ funding. In this context, it has become common to think of deposits as “good and stable” and wholesale funding as “bad and unstable”. Signs of this thinking are evident in Australia, as they are in many other countries.