A central bank systematically looking forward – and never pausing to reflect on its past record and the way this might be perceived by its public – might expose itself to the risk that past deviations of inflation from the medium term objective, by compounding over time, might endanger credibility and thus undermine the very foundations of the monetary institutions in place.
The emergence of these conglomerates was made possible by the lifting, in 1990, of the prohibition on combining banking and insurance activities in one financial institution. As the importance of cross sectoral financial activity increases, so does the need of the supervisory response.