But conducting monetary policy and financial supervision does not come without risks. If the institution tasked with ensuring banks’ financial soundness simultaneously influences their financing conditions through its monetary policy, conflicts of interest might arise. Besides restructuring, let alone closing down banks is an intervention into property rights which requires democratic accountability.
And institutional risk is a big risk that central banks are now facing: if you look to the United States or to Europe, you’ll see that the political and monetary centres have different perspectives. To have someone in the legal department who knows very well which way is best is very comforting and reassuring.