It is the one Forum in which regulators come together with finance ministries, central banks and the international financial institutions, specifically to look at financial stability issues, and how they should be resolved. In its first four years, the FSF has made some progress. Its work on Offshore Centres certainly led to improvements in regulatory standards in a number of those centres. And it has stimulated both the securities and insurance regulators to work more quickly, and in a more determined way than was previously the case. I have first hand knowledge of that impact. But more could be done. It remains difficult and slow to agree priorities between the Forum’s membership. I also think it could usefully take a somewhat broader view of its responsibilities. The Forum could do more to co-ordinate the activities of the sectoral international regulators and to contribute to their priority-setting. It could use its privileged links with the G7 finance ministers to bring more political impetus to the work of the bodies represented on it. IOSCO and IAIS, for example, have no other structural links to ministers, or to central bankers. The Forum is well placed to identify weaknesses in regulation, whether in member states or internationally. This would not involve duplication of effort, as some fear, rather the addition of urgency and focus to work already under way.
Monetary policy is not immune from the complexity of the real world. For instance, some unconventional policies may have had unintentional distributional consequences by pushing up asset prices, hence benefiting some households with important financial wealth. On the other hand, fostering economic recovery and reducing unemployment goes in the direction of helping the most vulnerable part of the population. In other cases, strong intervention may raise legitimate moral hazard concerns. Should Central Banks have refrained from acting at the risk of not fulfilling their mandate? Those simple questions remind us that decision making always involves some tradeoffs. It is all the more important that policy makers keep a clear focus on their ultimate objective. Central Banks should do their utmost to avoid any undesirable allocation or distribution effects of their policies. Those policies should be designed as neutrally as possible. This being said, the possibility of unintended side effects should not paralyze decision making when required by the situation in order to fulfill their mandates. The Eurosystem has faced such a situation when deciding on its program of large-scale asset purchases. I believe the decisions taken reflect an appropriate balance between the necessity of achieving the mandate and the desire to avoid undesirable side effects. Key principles underlying the implementation of the PSPP have been the minimization of unintended consequences and full neutrality, as illustrated for instance by the choice of the capital key to allocate purchases between various Governments debts.