on the other hand, this has more to do with the implementation of monetary policy than with its setting. as suggested by kay ( 2010 ). giovannini ( 2008 ). bis central bankers ’ speeches they might become relatively less important within the financial system, therefore reducing its impact. it would be an issue for empirical, policy - oriented research. so far, i have dealt mostly with solvency issues. but just as monetary policy affects not only risk - taking ( and therefore solvency ) but also general liquidity conditions, macro - prudential policies should also address liquidity risk. policies aimed at reducing liquidity risk are lagging behind those that improve the solvency of financial institutions. from a micro - prudential perspective, current proposals target liquidity and maturity mismatches of individual banks. regulators have suggested that each bank holds sufficient liquidity to survive a sudden, relatively short - lived shock, and that it funds long - term assets with stable sources such as long - term debt and deposits. these requirements reduce liquidity risk for each institution but neglect the systemic dimension of liquidity, and might be very costly in terms of limitations to maturity transformation, an essential function of the financial system for which there is high demand. 13 an alternative proposal would impose liquidity risk charges or levies that penalise short - term funding, still at the individual level ; 14 to help ease funding pressures on banks during a systemic liquidity crisis one could think of instruments with contingent maturity. 15 in fact, at the moment the thinking on the prevention of liquidity crises is still ongoing ; to mitigate acute liquidity shocks, as we have seen in the recent past, there is still no substitute for a determined intervention by central banks, even beyond the boundaries of their standard activity. during a crisis, individual banks ’ liquidity positions matter since those perceived to be more risky might be excluded from the market ; 16 in this case, only the central bank can make the market for liquidity function, by acting as a central counterparty. in the short run, central bank intermediation plays a stabilising role ; however, in the medium run it can increase the persistence of the shock by interfering with a market - led adjustment and can lead to moral hazard. 17 the bottom line here is that we need to develop macro - prudential policies that reduce liquidity risk ex ante in order to decrease the weight put on monetary policy tools during a crisis, since we don ’ t yet

know very well the long - run impact of prolonged, massive nonconventional interventions. conclusion let me finish with a few remarks on international coordination. our experience with the international interplay of monetary policies goes back decades. the degree of freedom given by floating exchange rates allows central banks, especially for large countries or areas, to target domestic inflation rates without the need for much coordination. on the other hand, the high degree of integration of capital markets achieved over the past few decades, while beneficial in terms of the availability of funds, means that macroprudential policies cannot be set in each country or region in an isolated way. limits to credit growth in one country may entail a spillover of funds to another country, and imbalances building up on one side of the atlantic can drag down the financial system on the other side. caballero ( 2009 ). perotti and suarez ( 2009 ). nicoletti altimari and salleo ( 2010 ). heider et al. ( 2009 ). de walque et al. ( 2010 ). bis central bankers ’ speeches as macro - prudential policies are developed and become effective, there will be a need for further international cooperation. central banks have a long history of exchanging views and information ; since they are very much involved in macro - prudential bodies this is solid ground on which to build effective mechanisms of cooperation in the macro - prudential field. could there be consequences for the setting of monetary policy? it is too early to tell, but given the various levels of interplay with macro - prudential policies that i have described, and the need to coordinate the latter, we need to think more about the international dimension of monetary policy, which may be driven by financial stability concerns. this will be on our agenda for the coming years. thank you for your attention. references adrian, t. and h. s. shin ( 2009 ), “ financial intermediaries and monetary economics ”, in handbook of monetary economics ( chapter 12 ). angelini, p., s. neri and f. panetta ( 2010 ), “ monetary and macroprudential policies ”, banca d ’ italia temi di discussione n. 801. bernanke, b. and m. gertler ( 2001 ), “ should central banks respond to movements in asset prices? ”, american economic review, may, 91 ( 2 ), pp. 253 – 257. caballe