how can this be achieved? lessons from the 2008 crisis taught us that microprudential policy alone tends to overlook the build - up of risk taking behavior of financial institutions. furthermore, long periods of low interest rates and a single monetary objective geared towards low inflation may also give rise to the build - up of systemic risk when uncoupled with sufficient prudential measures. therefore, macroprudential policy aims to maintain a balance between macroeconomic and microeconomic objectives through implementation of prudential principles in the financial system. the notion is to limit risk - taking behavior of financial agents. the history of macroprudential policy in indonesia 8. while much attention and work on addressing systemic risk through macroprudential policies became viral after the financial global crisis, a number of countries in the emerging market have used macroprudential tools well before. bank indonesia has implicitly paid due consideration and acknowledgement to the importance of macroprudential aspects in terms of maintaining financial system stability since early 2000. such acknowledgment gave rise to the establishment of the financial system stability bureau in 2003. 9. the assessment on financial system stability has also been deliberated through the publication of the financial stability review every semester since 2003. inevitably, our early experience in managing financial stability following the asian financial crisis in 1999 managed to salvage the indonesian economy from adverse impact of the 2008 turmoil. bis central bankers ’ speeches why the central bank has an important role in macroprudential policy? 10. now, one might question, who should be most suited to receive the mandate for macroprudential policy? observably, there are considerable differences in the institutional arrangements across countries as there is no “ one size fits all ”. however, in most jurisdictions, regardless of the type of institutional setup, the central bank is given an important role, including veto powers in a committee setup. 11. the pivotal role of the central bank is mainly supported by the uniqueness of the central banks function as lender of last resort and as an independent authority. the ability of the central bank to create liquidity in the banking system is a unique advantage in preserving financial stability. the central bank as monetary authority also has considerable information advantage concerning the complex interactions of the financial intermediary system and the operation of the real economy. such advantage would allow the central bank to gauge potential systemic risk, for example through calibrating the impact of macro - stress scenarios to the resilience of

). 25. panetta, f. ( 2022 ), “ mind the step : calibrating monetary policy in a volatile environment ”, op. cit. 26. the first of these is a measured approach to interest rate increases and balance sheet normalisation. the second is the flexibility embedded in our reinvestments under the pandemic emergency purchase programme. the third is the transmission protection instrument. 27. the frequency of seven - day us dollar operations has been increased from weekly to daily. see ecb ( 2023 ), “ coordinated central bank action to enhance the provision of us dollar liquidity ”, 19 march. 28. panetta, f. ( 2021 ), “ monetary autonomy in a globalised world ”, op. cit. 29. in the past, when concerns about having reached the lower bound were dominating discussions, forward guidance helped insulate the euro area from financial spillovers. but forward guidance is not suited to the current environment. see panetta, f. ( 2023 ), “ monetary policy after the energy shock ”, op. cit. 30. ecb ( 2023 ), “ monetary policy statement ”, 16 march. 31. panetta, f. ( 2023 ), “ monetary policy after the energy shock ”, op. cit. reproduction is permitted provided that the source is acknowledged. media contacts