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.
François Villeroy de Galhau: Monitoring financial stability, with active monetary policies Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at a conference at the London Business School, London, 23 November 2017. * * * Accompanying slides Ladies and Gentlemen, Price stability and the prevention of financial imbalances are often two sides of the same coin. Indeed, price stability and financial stability are supposed to be complementary and mutually beneficial. During the recent crisis in the euro area, the transmission mechanism of monetary policy was hampered by a fragmented interbank market, as borrowing conditions deteriorated in stressed countries. The resulting deterioration in the economy in turn contributed to a further worsening of the financial stress, in what we call a real-financial feedback loop. To cope with this difficult situation, the policy response in the euro area was twofold. First, we adopted an active monetary policy and launched unconventional measures that included the credit easing package. Second, we set up a Banking Union and assigned new macroprudential powers and tasks both at the European level (the ECB, the ESRB) as well as at the national level. In France, the Haut Conseil de stabilité financière (HCSF or High Council for Financial Stability) was created in July 2013 as the French authority with the legal ability to impose binding macroprudential measures. The economy is now recovering, so the medicine seems to have worked. However, our attention is now turning to the potential side effects of our treatment.