Central banks' actions in the financial market can create risks by causing a mismatch in bank balance sheets and increasing reliance on central bank money. A new approach called "Circular Monetary Economics" aims to make monetary policy more environmentally friendly and safer by improving how liquidity and credit are managed. This can reduce the chances of financial institutions spreading problems to each other and the wider financial system, while also making it easier for changes in interest rates and financial regulations to respond to crises caused by climate change or credit issues.