A senior Reserve Bank of Australia official says the central bank's mandate requires it protect "innocent bystanders" from financial crises.
Luci Ellis, head of the RBA's financial stability department, said that as a central banker she had no claim "to have insights into the national psyche".
"But it seems to me fair to say that Australia is not a society that tells people who have suffered misfortune that they are entirely on their own," she said in a speech in Sydney to a conference on dysfunction in capital markets.
She said our society does not have a "caveat investor" (investor beware) principle in all financial transactions, but has consumer and investor laws to protect "non-experts" along with regulations to stop "various kinds of abuse".
"We are also cognisant that actions that are rational for an individual can collectively result in a bad outcome," Dr Ellis said.
That is why financial stability mandates were highly relevant, she said.
The RBA has a mandate to promote financial system stability through it own charter, which requires it to promote the prosperity and welfare of the Australian people, as well as through its role in the Payments System Board and the Council of Australian Regulators.
But, Dr Ellis said, people should not be completely insulated from risks they "knowingly and willingly" take.
"A financial stability mandate does not mean that policymakers should try to ensure that nobody anywhere ever loses money," she said.
"It does not mean that nobody anywhere should ever default on their loans.
"And it certainly does not mean that no individual financial institution anywhere should ever fail.
"What it does mean is that the harm done to the real economy, to the innocent bystanders, should be as small as can be reasonably managed," she said.
It means the RBA should mix preemptive measures designed to head off trouble with responses to deal with problems as they occur.
"In other words, the authorities should both lean against risk and clean up the mess," she said.
Society's willingness to impose risks on its members was limited, she said.
"In particular, it has only so much appetite to impose risks on people who had little or nothing to do with the creation of those risks."
Regulatory reform has come a long way, especially from the "lean" perspective, but has a long way yet to go, particularly in the "clean" phase, Dr Ellis said.
"For example, a lot is being done to ensure banks, and other important parts of the financial system, can be resolved effectively if they do fail."
She also rejected the idea that reforms were making a trade-off between efficiency and stability that will reduce economic growth."The best available estimates of that trade-off, uncertain as they are, do imply that the regulatory reform program is a net benefit to society," Dr Ellis said.