Achieving the right balance between realism in what can be collected and prudence in managing the limited but adequate capital resources that have been provided to the banks by the Government is vital. Failure in this regard would press on the already fragile finances of the State.
One strand emphasizes that monetary policy is a blunt instrument affecting activity across a wide variety of sectors, many of which may not be experiencing speculative activity. To dampen speculative bubbles may require substantial changes in interest rates, which may hurt unaffected sectors. So in principle, it is better to use macro-prudential measures to counter financial imbalances, rather than monetary policy.