Indeed, public policies that rely too heavily on regulation of financial institutions, instruments, and markets with the aim of avoiding any period of financial stress almost surely entail a significant cost measured in terms of increased moral hazard, lower economic growth, and financial markets that do not always allocate resources to their most productive use.
In my experience, central bankers as a rule have an almost instinctive aversion to financial instability as I have defined it. Those instincts are no doubt rooted, at least partly, in the historical efforts of many nations to overcome structural defects in financial markets that left their economies prone to boomand-bust cycles.