impaired to a point where economic growth and welfare may be materially affected. see : www. ecb. europa. eu / pub / fsr / html / index. en. html 4 see for example for a theoretical explanation : korinek, a. and a. simsek ( 2016 ) “ liquidity trap and excessive leverage ”, american economic review 2016, 106 ( 3 ) : 699 – 738, g. b. eggertsson and p. krugman ( 2012 ) “ debt, deleveraging, and the liquidity trap : a fisher - minsky - koo approach ”, the quarterly journal of economics, volume 127, issue 3, 1 august 2012, pages 1469 – 1513. 5 see for example bean, c., m. paustian, a. penalver and t. taylor ( 2010 ), “ monetary policyafter the fall, ” in macroeconomic challenges : the decade ahead, federal reserve bank ofkansas city, issing, o. ( 2011 ), “ lessons for monetary policy : what should the consensus be? ”, imf working paper wp / 11 / 97, april, white, w. r. ( 2006 ), “ is price stability enough? ”, bis working papers no. 205, april, and white, w. r. ( 2009 ), “ should monetary policy ‘ lean or clean? ’ ”, federal reserve bank of dallas working paper no. 34. 6 see constancio, v. ( 2018 ) “ financial stability risks and macroprudential policy in the euro area ”, speech by vitor constancio, vice - president of the ecb, at the ecb and its watchers xix conference, frankfurt am main, 14 march 2018 and references therein, and svensson, l. ( 2017 ) “ cost - benefit analysis of leaning against the wind, ” journal of monetary economics 90, 193 – 213. 7 see cecchetti et al. ( 2000 ) ; borio ( 2012 ),, hanson, kashyap & stein ( 2011 ), 8 see crockett, a. d. “ marrying the micro - and macro - prudential dimensions of financial stability ”, remarks before the eleventh international conference of banking supervisors, held in basel, 20 – 21 september 2000. borio, c. ( 2003 ), “ towards a macroprudential framework for financial supervision and regulation? ”

the other hand, is a crucial tool for central banks in times of crisis, enabling them to ensure that payment and settlement systems remain operational. 12 deploying it effectively requires detailed information on market conditions and market infrastructures, as well as supervisory information on individual financial institutions, which should ideally be promptly available to the central bank in the event of a crisis. beyond crisis management, ensuring stable conditions requires stronger regulation and sounder supervisory practices. it also involves pre - emptive macroprudential policies that limit the build - up of imbalances and increase resilience ahead of future stress events. these pre - emptive macroprudential instruments can steer market participants towards maintaining conditions that do not endanger financial stability. 13 the question that frequently arises is whether banking supervision and macroprudential policy should become explicit responsibilities of central banks. 14 the various frameworks in place around the world cover a wide range of institutional arrangements. but irrespectively of the specific institutional set - up, all arrangements assign a significant role to central banks in safeguarding financial stability. 15 the reasons for this are straightforward. first, monetary policy and macroprudential policy can be seen as strategic complements. in addressing risks from financial imbalances particularly resulting from asset price overvaluations, more active macroprudential policy allows monetary policy stance to remain accommodative and support a macroeconomic recovery in line with price stability. this strategic interaction requires cooperation between both sets of policy - makers, which is more efficiently achieved within one institution, while observing the appropriate chinese walls. one of the main reservations about allocating banking supervision and macroprudential decisionmaking to central banks stems from the concern about the interaction and possible trade - offs between the financial stability and the price stability objective. 16 in the case of the ecb, the scope for trade - offs is clearly contained, as the primary objective of the ecb continues to be price stability. 17 and i would argue that there is merit in assigning responsibility for decisions in all three policy areas at the central bank, given that price and financial stability reinforce each other. most importantly, it ensures that decisions are consistent across policy areas ; spillovers from one policy area can be taken into account in an effective manner, while duly observing separation rules governing the policy domains. second, central banks have a deep knowledge about the functioning of financial markets. they continuously monitor financial conditions to identify vulnerabilities and threats to financial stability,