Additionally, if fiscal policy is weak, there can be the temptation to keep interest rates low for longer in order to generate seignorage revenues. Similarly, policy decisions related to financial stability require independence. As vulnerabilities in the financial system build up during good times, macroprudential authorities should act early on in a preventive manner.
Sufficient capital buffers need to be generated that can absorb losses in times of crisis. However, authorities may act too late or too little if they fear negative short-term - implications for credit growth or bank profitability.