This involves a Herculean effort, thanks in part, to the growth of “Correspondent banking relationships.” In effect, this means banks must know their customers’ customers as well. Banking supervision all over the world has to achieve the delicate balance between respect for customer privacy and making banks report suspicious transactions.
By having monetary policy overseen by independent officials, the incentive to misuse stabilization policy for partisan purposes is reduced. Monetary policymakers can focus on what is best for the economy over the long run.