Bankers have every incentive to figure out ways to circumvent regulatory constraints and, if the restraints on behaviour are deemed onerous, activity is likely to shift outside the regulatory perimeter. It may be possible to design policies which embed incentives to comply rather than evade, and smart supervision can help. But there could be occasions when tighter monetary policy is the only way to reach those parts of the financial system beyond the reach of regulation. In such cases, if other policies are not available, then “leaning against the wind” may be the only option left. As the simple analytical framework used earlier makes clear, tighter monetary policy reduces both aggregate demand and credit supply, while tighter regulatory policies do the same. But the empirical evidence suggests the impact of interest rates on credit is generally relatively weak, while capital and liquidity regulation have a very direct impact on leverage and maturity transformation and thus on the resilience of the financial system. So my sixth lesson is: both monetary and regulatory policies are required to maintain price and financial stability; moreover, monetary policy should remain focused on the control of inflation, while regulatory policies should be assigned to maintaining financial stability. Much is sometimes made of the risk of monetary and macroprudential policies pulling in opposite directions if they are assigned to different agencies.
ICLIF is also currently expanding its outreach beyond the Asia Pacific, Middle East and African regions. These initiatives are based on the conviction that human capital development needs to also include the leadership level. Human capital development in general is of strategic importance and is integral to the success of any organisation. Building human capital capability has never been more important in today’s world. Successful businesses of the future will be the  BIS central bankers’ speeches  1  ones that are able to fully harness their pool of talent. This more difficult operating environment demands new abilities to manage the new challenges and the new emerging opportunities, and the ability to deal with the high level of unpredictability. The role of leaders in such an environment is to create organisations that are able to effectively respond to the changing environment and at the same time nurture flexibility and innovation. Also important is that it is also supported with high values. Effective leaders in this era, will be those that can deliver results in this environment. It is all about having clarity of purpose and aligning the entire organisation to achieve these goals. Thus, the investment in leadership development is vital to equip leaders and future leaders with the necessary capability to perform their role in the organisation.