Already before the 2008 crisis, central bankers firmly believed that price stability is a necessary – and for some even a sufficient – condition to ensure financial stability. This view is referred to as the ‘Jackson Hole consensus’. Following the financial crisis, financial imbalances were seen as a huge source of disruption which decision-makers needed to remedy, questioning the relationship between monetary and financial policy tools and objectives. Let me give two polar views on that. A first approach, in line with the ‘Jackson Hole consensus’, is to clearly separate monetary stability from financial stability. In line with the Tinbergen rule and the Mundell efficiency principle respectively, one policy should fulfil one objective and each policy tool should be assigned to the objective it can fulfil the best. In this regard, monetary policy would not be efficient at mitigating financial imbalances but would not generate them either. On the other side, an extreme approach is to consider that both policies are strongly intertwined and that their respective objectives could be merged: in this case, monetary policy could reduce risk taking and target asset price bubbles. I consider that full adherence to the separation principle and the combining of objectives are both approaches that are too radical to conduct monetary and financial stability policies. The implementation of unconventional policies has blurred the frontier between the two objectives. Let me quote here my colleague Vice-President Vítor Constâncio: “Macroprudential policy and monetary policy rely on separate tools and aim to achieve different objectives.
It is also our duty to complete the European regulatory framework with the finalisation of the resolution mechanism to make the functioning of the banking sector smoother – in line with the spirit of the Banking Union, also enabling the Capital Market Union (CMU) to bloom, within the holistic approach of the “Financing Union for Investment and Innovation” I have suggested. Finally, we must ensure that the new regulatory framework is consistently implemented everywhere, and avoid any backtracking outside Europe. Financial stability is a global common good, and as such, regulatory arbitrage must not become an option. * * * Let me conclude. Credibility for central bankers now rests on admitting that monetary policy and macroprudential policy are somewhat porous, especially in a situation where we could have an upward financial cycle associated with weak inflation. This calls for a consistent action by central banks that covers both areas: price and financial stability. Moving away from an overly strict separation principle, let us try to be complete and consistent central bankers playing an active role in monetary policy as well as in macroprudential policies. 1 Altavilla C., Boucinha M., Peydro JL, 2017, Monetary Policy and Bank Profitability in a Low Interest Rate  Environment, ECB Working paper series #2105, October 2017. 2 Ratio of non-financial agents’ debt to GDP, first quarter 2017. Source: Eurostat, Federal Reserve, Banque de  France calculations.