In effect, all retail payment services are charged at a zero up-front fee,  12  BIS Review 95/2010  except large-value payment transfers through CHAPS 6 (which are typically charged at around £ This charging schedule is not well aligned with marginal costs. It encourages bundling of payment services and the charging of latent or hidden fees on other transactions services – for example, overdraft fees. Explicit charging for retail financial services would increase transparency and reduce the scope for distortions in the use of these services. High returns on treasury management services also present something of a puzzle. These include transactions, information and custodial services to clients. None of these activities are especially expertise-intensive and the market for these services ought in principle to be contestable internationally. (b)  “High risk/high return” business activities  The higher risk activities associated with finance, such as commercial and investment banking, do not on the face of it appear to yield as high returns on equity. Nonetheless these returns, at around 20%, are above levels in the non-financial sector. Investment banking activities are, in risk terms, a mixed bag. They comprise fairly low-risk activities, such as (merger and acquisition) M&A advisory work, with higher-risk activities such as securities underwriting and proprietary trading. To complicate matters, banks’ annual accounts data do not differentiate simply between these activities – for example, between market-making and proprietary trading activities in fixed income, currency and commodities (FICC) and equities. Chart 37 provides a revenue breakdown of US investment banks’ activities.

The implication is the need to cross-check the information on inflationary pressures and risks to price stability; this cross-checking implies that we bring together and compare different analytical strategies and that we use systematically all the information relevant to decision-making. Of course, monetary policy does not react mechanically to monetary developments, but rather responds to the information in monetary aggregates that is relevant for maintaining price stability over the medium term. This is the rationale behind the definition of "a reference value" for monetary aggregates. The monetary pillar supports a risk management approach to monetary policy. It allows for an early assessment and detection of potential imbalances. It sheds light on those risks at a longer time horizon than the one usually contemplated by monetary policy, but still relevant for the ultimate objective of price stability. This is of special significance and importance when financial imbalances build up in the economy, which are fueled by excess money or liquidity growth. Unwinding of those imbalances can be brutal and discontinuous – the so called non linear reaction – and, as such, very destabilizing. Empirical evidence suggests that asset booms have typically occurred when money and credit growth were above their long-term average. Whatever the loss function and ultimate objectives of Central Bankers, all would agree that monetary policy should not willingly contribute to the formation of such credit and asset booms.