monetary policy the question as to what extent monetary policy can contribute to financial stability is certainly not new. however, the answer had to be and has been adjusted in the light of experiences throughout the recent crisis. in the decade preceding the financial crisis, central banks kept interest rates at very low levels, partly due to an environment of seemingly exceptional macroeconomic stability. another important factor was certainly the widespread opinion prevailing at that time, that monetary policy should not lean against a bubble that is building up, but intervene after a bubble has burst. from today ’ s perspective we know that by applying such an asymmetric monetary policy approach two important aspects were underestimated. first, in the low interest environment the search for yield caused market participants to take riskier positions and contributed to the build - up of systemic risk. second, the turbulences when the bubble burst could not easily be contained by making use of traditional monetary policy instruments but necessitated unconventional measures in several bis central bankers ’ speeches policy areas. in addition, serious repercussions in the financial sector and the real economy could not be prevented. against this background, the role of monetary policy has been stated more precisely. there is still no doubt that price stability should be the key goal of a central bank. fulfilling this mandate forms the basis of our credibility, and we must not lose sight of this goal when becoming involved in crisis management. in addition, we should be aware that monetary policy is not able to fully avoid the build - up of bubbles and the event of crises. pretending otherwise would lead to expectations in monetary policy that cannot be satisfied, and this would ultimately undermine central banks ’ credibility with negative consequences for our ability to maintain price stability. however, as a central lesson from the crisis, monetary policy has to take a closer look at the possible build - up of financial imbalances – because these have implications for price stability. in the case of the eurosystem, this implies that monetary analysis, which already focuses on longer - term risks for price stability stemming from increasing money supply, will gain in importance. this will allow monetary policy to extend its horizon and to apply monetary policy more symmetrically across the financial cycle, in line with the fact that financial imbalances regularly build up over a longer period of time. such a more symmetric approach to monetary policy is based on central banks ’ primary goal of price stability, and will contribute to financial stability. however, while price stability is a necessary prerequisite for financial stability, it

is far from being the only one. in addition, central banks equipped with only one main instrument, i. e. the interest rate are not able to meet several goals, that is price stability and financial stability at the same time. for monetary policy to be able to concentrate on price stability, it is therefore indispensable that macroprudential policy is equipped with an individual set of instruments. this notwithstanding, monetary and macroprudential policy cannot be seen completely separately from each other due to potential spillovers. therefore, some coordination between both policy fields is warranted, although without blurring the individual objectives. 3. how to design macroprudential policy with this in mind, i would like to turn to the more practical issues associated with the question “ how to design macroprudential policy? ”. for efficient macroprudential policy, two things are crucial : a thorough analysis of the build - up of systemic risk to be able to issue warnings and recommendations, and the translation of such warnings into policies and action. in order to facilitate the transition from analysis to action, a clear mandate for macroprudential supervision is needed. and there are good reasons why central banks should be involved as long as their independence and the hierarchy of their objectives, with price stability as the primary goal, are respected. their extensive knowledge of financial markets and the macro economy is very valuable for macroprudential purposes, and their participation will facilitate forming a consistent view for both monetary and macroprudential policy. in this regard, i highly welcome that the bundesbank is to be given an explicit macroprudential mandate. with the introduction of countercyclical capital buffers, the first truly macroprudential instrument will be at the disposal of national supervisory authorities. by dampening excessive credit growth, countercyclical capital buffers will make it possible to “ lean against the wind ” beyond the scope of monetary policy and thereby enable monetary policy to better focus on price stability. this is especially important in a monetary union such as the euro area. as the common monetary policy has to ensure price stability for the euro area as a whole, it is not suitable as a means of preventing excessive credit growth in single countries, which is often aligned with the build - up of systemic risk. for example, it is beyond the reach of monetary policy to counteract regional overheating in housing markets, which often goes bis central bankers ’ speeches along with excessive credit growth.