Whether or not central banks have formal prudential regulatory powers, they retain an irreducible role in financial stability through their position as managers of system liquidity risk and their associated role in crisis management. What is important is that this function be effectively coordinated with the regulatory policies conducted by the prudential supervisor.
This is not the occasion to examine the relative merits of different coordination models in detail. Most likely there are a range of different models that can be made to work, depending on each jurisdiction’s history and legal tradition. Here I simply make the observation that, in Australia’s case, the coordination arrangements held up well during the crisis period.