Global macroeconomic factors initiated the financial market crisis, but lack of proper reactions from central banks and supervisors to increased liquidity and growing shadow banking made the escalation of the crisis possible. Flexible inflation targeting offers some room for fine-tuning of monetary policy to react to credit expansion and asset price increases. Main area for a change is, however, supervision: Together with considerable improvements in micro-prudential supervision, intensified macro-prudential cooperation between central banks and supervisors is necessary. Central banks with their close market contacts and macro-analysis capabilities are natural candidates for taking charge of macro-prudential stability policy, that lies between monetary policy and microprudential supervision.

Keywords: Financial market crisis, Monetary policy, Macro-prudential supervision