This speaks in favour of maintaining or strengthening macroprudential capital buffers, being cautious on profit distributions and share buy-backs, and closing regulatory gaps, including by fully implementing the Basel III reforms. [34] Taking financial stability into account is not just about market stabilisation.
To ensure the proportionality of their monetary policy decisions, central banks need to consider potential side effects regarding the buildup of financial stability risks, even if those risks may materialise only in future. During the years of low inflation, monetary policy encouraged risk-taking as part of its monetary policy transmission mechanism.