First, without sustainable macro policies (fiscal in particular) and price stability the financial system may easily find itself in trouble or may intermediate insufficiently. Secondly, although its aim is to reduce system-wide risk, macroprudential policy in the end is a set of particular tools targeting particular problems in particular parts of the financial system.
I’d also like to preemptively address a potential objection to this option. That is, that it may be a “stealth” cut to our strong capital levels for the largest banks. I reject that characterization, and it is not supported by the approach I have outlined today.