Market participants did not anticipate the sharp decline in implied default correlations that followed the downgrades of Ford and General Motors debt. Prices moved quite a bit for a short time as portfolios were rebalanced, but spillovers to other markets were limited, and market volatility subsequently eased.
This implies that in Model 2 the central bank should be able to adopt measures that take adequately into account different macroeconomic developments across countries. Overall, there seems to be greater conflicts of interest between the objectives of macro and micro prudential supervision than between price stability and macro-prudential supervision.