Let us recall that banks have to perform a multidimensional set of functions in the economy: •  ensuring that payments are reliably made for the transactions that underpin all economic activity;  •  providing safety for the liquid assets of the general public: households and firms;  •  evaluating creditworthiness of borrowers, monitoring their financial condition and ensuring that loans are repaid;  •  acting as broker for a range of other financial services.
Changes in bond prices, stock prices, and exchange rates imply movements in the cost of capital and relative prices that influence investment and foreign trade; exchange rate movements also directly affect the prices of goods and services. Finally, asset prices can affect the value of collateral and thus the provision of credit, thereby influencing aggregate spending.