In such a scenario, it will be even more important for all institutions with financial stability responsibilities - be it the central bank, supervisory authority or other government agency - to co-ordinate their efforts in the area of system oversight and to share any information which could be relevant to the proper fulfilment of their respective functions. Indeed, whereas until recently the prevailing concern related to the choice of institutional arrangement for the supervision of the financial sector, it is now sometimes argued that it is not the institutional framework which matters most, but rather the existence of adequate mechanisms guaranteeing the exchange of information and policy co-ordination between the entities responsible for overseeing systemic stability and those that monitor the health of individual financial institutions. Beyond that, it is claimed, any institutional set-up can work. Likewise, any one can fail. While this conclusion might be valid from a national point of view, it does little to address the question of whether information exchange and policy co-ordination relating to financial sector developments affecting the EU as a whole would be more appropriately addressed by a supranational EU institution with supervisory responsibilities, or whether such tasks are best handled by the national authorities of member countries. This issue has certainly gained in importance in recent years with the increased recognition of the links between supervision and monetary policy.
From a broader policymaking perspective, moreover, there is also the question about the role that financial stability concerns should play in the formulation of macroeconomic policy more generally. I am sure that the second seminar session will provide further insights in this regard, when the interrelationship between fiscal policy, monetary policy and financial stability will be considered. Policy transparency, good governance and market discipline The relationship between macroeconomic policy and financial stability also serves to highlight the importance of policy transparency and good governance, both at the national and corporate level. In fact, it is generally agreed that the likelihood of disturbances to the financial system can be greatly diminished if the authorities manifest their policy intentions clearly, and explain the rationale behind policy measures once decisions have been taken. This helps to reduce the chances of investors and creditors making uninformed decisions, only to reverse them later. This aspect has become especially relevant in the context of capital account liberalisation, particularly in those countries that operate variants of fixed exchange rate regimes. It is even more so in countries which are simultaneously engaged in efforts to place public finances on a stable footing and to gain credibility for the central bank’s monetary policy. Here, a sudden shift in investor confidence could have serious repercussions, not only for financial stability but also for the conduct of monetary and fiscal policy.