The U.S. financial system remains susceptible to panics and runs, and policymakers may need to use monetary policy to keep the situation stable, a top Federal Reserve official said on Friday.

John Williams, president of the San Francisco Fed, took issue with the conventional central banking wisdom that only regulatory and supervisory policies should be used to ensure financial stability.

He said the financial crises of recent years suggest central bankers can no longer think of financial stability and macroeconomic performance as two separate spheres.

Although macroprudential policies are the appropriate first line of defense against financial instability, these defenses are not impregnable. In all likelihood, monetary policy will need to play a more active role, Williams told a conference at the International Monetary Fund.

While Williams did not address the current state of the U.S. economy and monetary policy in any detail, his remarks do suggest he might support further monetary easing by the Fed if the crisis currently bubbling up in Europe infects U.S. financial firms or the broader economic outlook.

While recent financial reforms were necessary to prevent the worst excesses that led to the 2008 meltdown in credit markets, they may not be sufficient to forestall another major crisis.

The funding system rooted in the capital markets is inherently at risk for runs, contagions, and panics, Williams said. The risk of runs in financial markets remains a very real concern for financial and macroeconomic stability.