I cite all this to underline that the Porter Commission made an important difference to our financial landscape. But financial reform, important and topical though it may be, is not the central theme of my lecture. Instead, I will focus on the Commission’s work on the conduct of monetary policy.
The macroprudential instruments that are being considered are classified into three categories, namely capital-based instruments (including countercyclical capital buffers, sectoral capital requirements, and dynamic provisions), asset-side instruments (including loan-to-value and debt-to-income ratio caps), and liquidity-based instruments (including countercyclical liquidity requirements). These tools are intended to target the sources of systemic risk, such as liquidity and maturity mismatches, leverage, and interconnectedness.