conclusion let me summarize and conclude. the public often sees central banks as responsible for financial stability, but, in practice, this is a mandate the banks rightly share with the government and other financial regulators and supervisors. so although central banks don ’ t themselves have a broad set of instruments to mitigate financial vulnerabilities, they do have that system - wide view, which they can and do use to promote financial stability by making public their analyses of financial vulnerabilities and risks and making recommendations for preventive policy actions. in the end, how central banks contribute to financial stability, in conjunction with other public authorities, will depend on the macroprudential framework in place. what we have learned from the participants at this conference is that the framework varies across jurisdictions, typically reflecting differences in institutional settings, and that the different structures seem to be working well. thus, the important take - away from this evidence is that the framework ’ s form matters less than its function and that the measure of success should be macroprudential outcomes, namely lower systemic risk and fewer instances of severe financial stress. at the same time that central banks are enhancing their efforts to promote financial stability, they must maintain their focus on monetary policy to achieve price and macroeconomic stability. these are necessary conditions for financial stability. on behalf of my colleagues here at the bank of canada, thank you for joining us and for sharing your views on this important issue. bis central bankers ’ speeches

lawrence schembri : stress prevention – central banks and financial stability remarks by mr lawrence schembri, deputy governor of the bank of canada, at a joint bank of canada, international monetary fund, centre for international governance innovation and peterson institute for international economics workshop, ottawa, ontario, 6 may 2016. * * * for the better part of the past two centuries, central banks have played an important role in the maintenance of financial stability, but primarily one of “ stress or crisis management. ” in particular, central banks have served as lender of last resort, providing liquidity to prevent stress from sparking contagion in solvent, but illiquid, financial institutions. but that role is starting to change. while central banks responded boldly to the global financial crisis with liquidity provision and monetary policy actions to avoid a repeat of the great depression, the severity of the economic fallout obliges us to ask whether they could have done more to prevent it, rather than just trying to manage and mitigate its economic impact. this query goes well beyond considering whether monetary policy aggravated the financial vulnerabilities that contributed to the crisis and raises broader questions concerning the responsibilities of central banks. it ’ s time, then, for central banks to rethink their role in financial stability : • first, by recognizing that while the best contribution monetary policy can make to financial stability is price and macroeconomic stability, this is a necessary, but not sufficient, condition for financial stability ; • second, by focusing on crisis prevention through means other than monetary policy, while at the same time modernizing their role as liquidity provider or lender of last resort ; and • third, by enhancing their contribution to financial stability by exploiting two of their key strengths – their financial - system - wide perspective and their analytical capacity. going beyond monetary policy as a crisis prevention tool in thinking about enhancing the role of central banks, we should reconsider two notions that have helped to advance our analysis. the first is the “ lean versus clean ” debate. as lars svensson has compellingly argued, monetary policy is too blunt an instrument to be used to mitigate financial vulnerabilities. other tools are better suited for this purpose. the second notion is the “ lines of defence ” analogy, with monetary policy serving as the last defensive barrier when other measures to reduce financial vulnerabilities and mitigate systemic risks are either absent or inadequate. this view suggests that actions be taken sequentially. consider,