Their failure to recognize changes in the external environment usually means that they fail to fully take the crisis situation into account, and that past experiences applicable only to peacetime dominate their decisionmaking.7 If the central bank is given just a single mandate of price stability, it can come up with a consistent policy mix.
This will test regulators and supervisors, for whom the challenge will be to create rules of the game that are robust to fad, fashions and arbitrage. There are several consequences of the characteristics I have mentioned and to which will I return. However, one, consolidation, has itself become a characteristic of the present environment.