While most of the structural reform imperatives fall outside the mandate of central banks, I believe that central banks, by keeping inflation in check and creating an environment of financial stability, can make a meaningful contribution. Economic prosperity is built on stable foundations provided by central banks taking their mandate seriously.
At the end of the day, management decisions have to be taken by those who bear the risks and reap the rewards. What the supervisors could do is impose additional capital or liquidity requirements whenever they have doubts about the sustainability of a bank’s business model. 5.