Monetary policy has a fairly settled set of tools – first and foremost, at least in conventional times, the short-term interest rate. Financial stability, however, has neither a primary instrument nor a standard taxonomy of instruments.
Instead, there are various different instruments, ranging from those from the toolbox of the supervisory regulations (Article 5 of the SSMR), such as maximum loan-to-value limits and countercyclical capital buffers, to taxation, as well as interest rates. Could this become an example of policymaking with other people’s instruments?