It might also have the advantage of fostering an overall assessment of financial data needs for all governmental purposes. However, there would also be some substantial disadvantages to running comprehensive financial data collection through a separate independent agency established for this purpose. A new agency would entail additional budget costs because the agency would likely need to replicate many of the activities of the regulatory agencies in order to determine what data are needed. More importantly, because it would not be involved directly in supervision or market monitoring, such an agency would be hampered in its ability to understand the types of information needed to effectively monitor systemic risks and conduct macro-prudential supervision. Data collection and analysis are not done in a vacuum; an agency’s duties will inevitably reflect the priorities, experience, and interests of the collecting entity. Even regular arms-length consultations among agencies might not be effective, because detailed appreciation of the regulatory context within which financial activities that generate data and risks is needed. The separation of data collection and regulation could also dilute accountability if supervisors did not have authority to shape the form and scope of reporting requirements by regulated entities in accordance with supervisory needs. An alternative organizational approach would be available if the Congress creates a council of financial regulators to monitor systemic risks and help coordinate responses to emerging threats, such as that contemplated in a number of legislative proposals.

The responsible authority or authorities vary across countries. In some countries it is the central bank, in other countries there is a separate financial supervisory authority, sometimes the responsibility is shared between different institutions. In Sweden, the Financial Supervisory Authority is responsible for supervision and regulation, the Riksbank is responsible for lending of last resort to solvent banks and for promoting a safe and efficient payment system, while the National Debt Office is responsible for the resolution of failed banks. During times of crisis, these authorities cooperate closely with the Ministry of Finance. My point here is that financial-stability policy and monetary policy are quite different, with different objectives, instruments and responsible authorities, the latter with considerable differences across countries. This does not mean that there is no inter-action between them. Financial stability directly affects the financial markets, and financial conditions affect the transmission mechanism of monetary policy. Problems in financial markets may have a drastic effect on the real economy, as the current financial crisis has shown. Monetary policy affects asset prices and balance sheets and can thereby affect financial stability. But the fact that financial-stability policy and monetary policy are conceptually distinct, with distinct objectives and distinct suitable instruments, has to be taken into account when considering the lessons of the financial crisis for monetary policy. In particular, it makes little sense to extend the mandate of monetary policy to include financial stability. 15 What are the specific conclusions for flexible inflation targeting?