Monetary policy and banking regulations impact the financial market stability in several ways, including:

Interest rates: Monetary policy will have an impact on interest rates because it influences the cost of borrowing for people and businesses. This determines the actual amount of money that people and businesses spend and invest.

Bank balance sheets: This monetary policy can affect the liability side of bank balance sheets.

Risk premiums: Monetary policy may impact the risk premiums in financial markets.

Asset prices: Monetary policy affects the asset prices of a financial system, therefore impacting the stability of the financial system.

Credit losses: Monetary policy impacts the rate of default by firms and therefore impacts credit losses on loans to those firms.

Macroprudential policies: Macroprudential policies are necessary correct imbalances in credit and asset markets.