For instance, increases in reserve requirements affect only the banking sector, which may lead to disintermediation and increased cost of credit for those with limited access to other sources. In Chile many of these tools are under the control of the Superintendence of Banking and Financial Institutions (SBIF). This makes the Financial Stability Council I just mentioned a crucial instance for coordinating and implementing financial regulation with a systemic view. 3. Monetary policy in an environment of financial crisis  When using policy tools to prevent financial crisis is not enough and the financial system becomes unstable, standard monetary policy tools might be impaired. Many central banks target the overnight interbank rate, so the transmission of monetary policy relies on a working financial system and its effectiveness may be significantly weakened in conditions of financial distress. Furthermore, under extreme conditions, such as those experienced during the recent financial crisis, standard monetary policy may reach its natural limit that is the zerolower bound. Under these conditions, unconventional monetary policies may be the only ones at hand for a central bank. BIS central bankers’ speeches  3  The experience of the United States and Europe with unconventional tools during recent years is well known to all of you, so let me briefly describe our experience with them. It is important to mention that the scale of our interventions was substantially smaller, since we had to quickly undo many of our policy actions because of the fast recovery of the Chilean economy after the recession of 2009.

With these two questions in mind, we will also explore the consequences of financial crises on unemployment, household credit, and the real economy, and will try to understand how markets operate in environments with multidimensional private information. Our last session will be devoted to analyzing the effects of unconventional policies in dealing with the impact of the recent financial crisis in Chile. I am confident that valuable lessons will come out of these two days of discussion. To begin, I would like to share my views and Chile’s experience in four issues that are currently in the policy debate and that will underlie the discussion we will be having over the next two days. The first issue relates to the debate on financial stability as a macro policy goal and which institutions should be responsible for it. I will then turn to the availability and usefulness of policy instruments to pursue financial stability. I will also refer to two aspects of our experience in conducting monetary policy during financial crises: our experience with unconventional policies during the recent global financial crisis and our experience with financial rescues in our own financial disaster in the early 1980s. In the latter case, I will also touch briefly on the impact of rescues on the Central Bank´s balance sheet. 1. Financial stability as a policy goal. The role of the central bank  The recent financial crisis challenged the paradigm that the stability of the financial system could be preserved through a combination of micro regulation and macroeconomic stability.