An international debate has now begun on how authorities might directly change the behaviour of financial market participants to mitigate the risks identified in Financial Stability Reports. This debate, in part, is focusing on whether central banks need specific powers to intervene directly in this regard.
For example, one proposal is that central banks might have an explicit role in setting capital ratios in response to emerging risks identified in their financial stability assessments. A further area for discussion is how monetary policy might better respond to asset price developments. For example, should policy “lean against the wind” by tackling asset price inflation more directly.