But it can come at the expense of reduced incentives for balance sheet repair by individual banks. It can promote the evergreening of non-performing loans and even regulatory forbearance. In this context, unconventional policy instruments are more intrusive than conventional monetary policy. And they can create deeper market distortions that aggravate the risk of a misallocation of resources and financial instability.
It is often argued that prudential and not monetary policies should be geared towards financial stability risks.