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In terms of ensuring financial stability, a broad consensus is beginning to emerge and the concept of macro-prudential policy is coming into being. Its purpose is to safeguard the stability of the financial system as a whole, whereas traditional banking supervision is aimed at ensuring the solvency of individual institutions. This is a crucial lesson learned from the financial crisis. To fulfil their responsibilities, macro prudential policymakers will be given new instruments from the area of regulation and supervision, such as the countercyclical capital buffer for banks. Central banks are to play a major role in this respect.
Germany has taken an effective approach in which several policy areas, especially banking supervision, or tax policy, say, can play a role in ensuring financial stability. In any case, only democratically elected bodies can introduce new regulations, if need be, on matters such as the shadow banking system. All in all, the objective of ensuring financial stability is not one that is entirely suited to being assigned solely to an independent central bank.
The touchstone for any demands to change the role of central banks is ultimately whether these demands in any way affect central banks’ political independence and the credibility this gives them. These are essentially standards that the IMF expects central banks to meet.