In a narrower vein, the existence of a high level of unemployment may also hamper the conduct of monetary policy. It can all too easily lead to calls for an expansionary monetary policy as a solution to a problem which monetary policy cannot solve.
This also means providing enough transparency about risk exposures to allow the market to confidently distinguish strong from weak banks, and reducing market uncertainties on the future treatment of different classes of claimants. Regulatory stress tests are a central part of this process, as are efforts to improve disclosure.