Research suggests that, for instance, monetary policy accommodation can create incentives for financial market players to take on too much risk, thereby sowing the seeds of new excesses in the financial system.4 For example, commensurate effects on several US banks were identified by Bundesbank economists in the run-up to the crisis.5 This is in line with the literature, according to which monetary policymakers are one of the causes of these problems and are hence responsible for mitigating new risks.6 The crisis was the product of various factors.
The working group is expected to propose a list of financial conglomerates and advise on the monitoring and reporting system. In accordance with the policy announcement, a Working Group on Development Financial Institutions (DFIs) has also been constituted to examine the broader framework of regulation of NBFCs. The Group is expected to submit its report shortly.