And through the process of stress-testing the balance sheets of financial institutions, the FPC and PRA are now laying out transparently the risk standard they are requiring from firms and from the financial system as a whole and which is the subject of external scrutiny. But this has not fully allayed occasional criticisms of the Bank’s regulatory policy choices. At various times, the Bank has been warned against pursuing the stability of the graveyard or the tendencies of the Taliban. A somewhat better defined financial stability anchor, set by Parliament and reflecting society’s desires, could over time damp these criticisms. In the 1950s and 1960s, central banks and academics strove to define an appropriate anchor for monetary policy. That brought success, with inflation targets and attitudes now wellanchored. This gives grounds for optimism that financial stability can follow the same path though, as monetary policy found, the journey is likely to be long and arduous. Myopia biases The Bank’s monetary, macro-prudential and micro-prudential policy regimes all exhibit instrument independence. Decisions are made by Committees of technocrats, operating at arms-length from the political process. The case for delegation of policy responsibility is founded on myopia biases within society at large or among its elected representatives. In a monetary policy context, myopia tends to manifest itself as a desire to bring forward tomorrow’s income to today, typically by setting monetary policy too loose. As one former US president is rumoured to have put it, “I want tight money – and lots of it”.
It has been argued that targeting a 2% inflation rate results in this zero bound constraint binding too frequently, inhibiting the effectiveness of monetary policy. 47 A higher target would loosen that constraint. This academic debate may run for some time. On the financial stability side, the position is less straightforward. There is no single, easily observable or quantifiable target for systemic risk against which to hold the FPC and PRA to  45  Bernanke and Mishkin (1997) first coined this term in the context of inflation–targeting. 46  Shiller (1997). 47  Ball (2014). BIS central bankers’ speeches  7  account. And the public at large often do not have well-defined or strong attitudes towards financial stability – except, perhaps, when things go wrong. Since 2012, the Bank has been surveying the general public on how they believe the Bank has performed in protecting the financial system. Some reassurance can perhaps be taken from the fact that this has moved from a net dissatisfaction score of 13 in 2012 to a net satisfaction score of 40 today. 48 Nonetheless, by itself this approach falls well short of having a clear objective against which the FPC and PRA can periodically be assessed. The FPC has begun publishing a set of financial stability indicators against which it assesses systemic risk and is held to account.