, central banks may be well advised to actively lean against the emergence of financial imbalances in order to mitigate systemic risk and the associated longer term risks to price stability and economic welfare. 6 at the ecb, we have always emphasised one tool which helps us maintain a medium to long - run orientation : the “ monetary analysis ”. the monetary analysis is one element of the ecb ’ s two - pillar framework – in addition to the economic analysis – for the regular assessment of risks to price stability. but we have always foreseen that monitoring monetary and credit developments is also part of an overall framework for addressing asset price misalignments. the analysis of low - frequency trends in money and credit developments has always been associated with the emergence of imbalances, because it allows us to assess risks to price stability well beyond the typical shorter term forecast horizons. this notwithstanding, for what concerns the monetary policy strategy, significant efforts are still to be undertaken in building up an appropriate analytical framework linking the various sources of systemic risk to economic outcomes over long policy horizons. this may robustify the ecb ’ s two - pillar monetary policy strategy to better cope with risks of highly uncertain, low probability but very costly events such as financial crises. a better understanding of the transmission channels that exist between the financial and the real sectors is therefore of the essence. while some headway has been made in studying non - conventional transmissions channels such as the risk - taking channel, other issues still see f. s. mishkin ( 2010 ) : “ monetary policy strategy : lessons from the crisis ”, paper presented at the ecb central banking conference, “ monetary policy revisited : lessons from the crisis ”, frankfurt, november 18 – 19. see, for example, borio, c. ( 2011 ) : “ central banking post - crisis : what compass for unchartered waters? ”, bis working paper no. 353, september. bis central bankers ’ speeches remain work in progress. 7 for example what is the influence of interest rates on risk tolerance? what is the interrelation between funding and market liquidity? what are the determinants of the leverage cycle, and which role is played by financial innovation? given the complexity of the issues involved one has to admit that the development of an operational framework linking monetary policy to the various forms of systemic risk is extremely complicated and poses severe intellectual challenges. financial stability risks may also arise from excessive monetary policy activism geared toward buying insurance against

s. shin ( 2011 ), “ financial intermediaries and monetary economics ”, in : b. m. friedman and m. woodford ( eds. ), handbook of monetary economics, vol. 3a, elsevier. see, for instance, maddaloni, a. and jose - luis peydro ( 2011 ), “ bank risk - taking, securitisation, supervision, and low interest rates : evidence from the euro - area and the u. s. lending standards ”, review of financial studies, vol. 24, no. 6. in fact, such a division of labour receives support from latest research conducted within the macroprudential research ( mars ) network of the european system of central banks. under most circumstances it turns out that financial imbalances are better addressed by macroprudential policy measures ( e. g., counter - cyclical loan - to - value ratios ) rather than by a monetary policy “ leaning against the wind ”. see beau, d., l. clerc, and b. mojon ( 2011 ) : “ macro - prudential policy and the conduct of monetary policy ”, banque de france, occasional papers no. 8, and lambertini, l., c. mendicino, and m. t. punzi ( 2011 ) : “ leaning against boombust cycles in credit and housing prices ”, banco de portugal, working paper 8 / 11. bis central bankers ’ speeches to conclude, challenges are immense both on the technical side as well as on the governance side to safeguard financial stability. in essence, the task consists in reinforcing disciplining mechanisms in private and public debt markets. there is a need to act in a number of areas. central banks have an important role to play as coordinator / facilitator / initiator. they also have the proper incentives to do so in order not to overburden monetary policy. bis central bankers ’ speeches