Central banks can help build social capital through their actions. Second, social capital is an important determinant of a community’s wellbeing, alongside human capital, natural capital and financial and physical capital. (I like to describe these capitals as our collective “economic capital”30 but that is a subject for another day.) An important fact is that social capital does not grow on its own.
The job of a banking regulator, difficult under any circumstances and for a variety of reasons, is especially critical as it regards the connection running between banking risk and the impact of such risk-taking on the macroeconomy.