One is set out by Nobel laureate Jan Tinbergen in his contribution “On the Theory of Economic Policy”: achieving a number of goals requires an equal number of instruments. For example, setting the interest rate is effective when targeting a specific goal such as inflation. However, using one instrument to try to achieve multiple goals inevitably impairs the effectiveness of that instrument.
While it was sensible at the time, given that this was the first real world test of our system, for us to use the belt and suspenders approach of additional, temporary capital distribution restrictions, we now know that we can have particular confidence in the stress capital buffer framework, as it is informed by a real-time stress testing regime.