involved, on the long run, between inflation and growth. that robust, and commonly shared analytical background on what monetary policy could – and could not – achieve was essential in establishing the primacy of price stability and the legitimacy of independence in monetary policy making. we are very far away from such a theoretical agreement on the causes of financial instability, on the real trade - offs between efficiency and stability in finance, on the role of innovation and, finally, on the origins and detection of asset and credit bubbles. it would therefore be illusory, and dangerous, to expect that a precise mandate for financial stability could be defined, let alone quantified, in a foreseeable future. the situation is therefore somehow confusing and this raises important challenges for the future. at the risk of oversimplifying, central banks associated with – or responsible for – financial stability may find themselves with : two separate missions : price and financial stability two different accountability regimes : full independence for monetary policy ; coordination or subordination mode for financial stability two interacting sets of instruments : interest rates and macro prudential tools ( a situation made even more complicated when unconventional monetary policies are implemented ) the potential for confusion is real. it is not difficult to imagine situations where actions that central banks take on pure monetary policy grounds are nevertheless contested in the name of financial stability. to some extent, this has always been a possibility. the difference, now, is that institutional frameworks exist through which – implicit or explicit – challenges to central banks operational independence can materialize. it might be tempting to conclude, then, that central banks should stay away from financial stability and concentrate exclusively on ensuring price stability. this, unfortunately, is impossible, if only for reasons that charles goodhart has well explained in a previous paper : ultimately, central banking is about providing liquidity and liquidity provision is an essential and central component of financial stability. what can we conclude? first, central banking is not only about monetary policy but also involves an essential component of financial stability. this seems to me a broad consensus coming out of the crisis. bis central bankers ’ speeches second, monetary policy is about setting interest rates, but also involves observing and analyzing leverage and liquidity. monetary aggregates as well as the volume and modalities of maturity transformation reveal very useful information on the transmission mechanism. this is actually the conventional wisdom within the eurosystem, through the use of the second pillar. although less acceptable outside the euro area, i conjecture that the

lessons of the crisis will trigger some rethinking here and there. finally, the debate on whether monetary policy should also aim at financial stability must give more consideration to the awkward interaction between instruments and the diversity of accountability regimes. both create the potential for additional confusion about the ultimate objectives of each policy. it seems to me that most of the discussions are conducted under the implicit assumption that price stability will be as easy to maintain in the next decade as it was in the past. so, there would not be much to lose in “ diverting ” some of the power and credibility of monetary policy to seeking financial stability. it is very clear that this assumption is severely tested, perhaps sooner than we thought. it will be important, in this environment, to maintain clarity of purpose and robustness in institutional arrangements in order to limit the risk of weakening the benefits of central bank independence, which were so hardly won over the last decades. bis central bankers ’ speeches