A floating exchange rate regime is the most adequate to prevent exchange rate policy from inducing currency  8  These authors find that only half of the accelerated expansions of broad monetary aggregates result in higher inflation, but the probability increases when this coincides with an asset price boom. 9  For an interesting discussion in the context of the present crisis, see Borio (2008). BIS Review 150/2008  5  speculation. The fiscal policy can also contribute to reduce foreign exchange pressures. However, these measures may not be enough, and thus in some exceptional periods, and with the purpose of preserving financial stability, an intervention in the foreign exchange market is warranted. 10 In Chile, since the floating exchange rate regime was adopted, this has occurred on three occasions, all deemed exceptional. To avoid conflicting goals, consistency between the intervention and the direction of the monetary policy is important, and to that end a first requisite is that the intervention does not have a specific point or range objective for the exchange rate. Finally, the current international financial crisis underscores the importance of having an adequate framework for international reserves management, as a key tool to cushion the impact of international liquidity shocks on the economy. The accumulation of reserves in Chile that begun in April this year was decided precisely to strengthen the liquidity position before the eventuality of a worsening of world financial conditions, which is what actually occurred in September.

See: Consultation Paper 5/12 ‘Implementation of Basel standards’; Dahl, D, Meyer, A, and Neeley, M (2016), ‘Bank size, compliance costs and compliance performance in community banking’, Mimeo; Dolar, B and Dale, B (2020), ‘The Dodd-Frank Act’s non-uniform regulatory impact on the banking industry’, Journal of Banking Regulation, Vol.21, pages 188-95; Elliehausen (1998), ‘The cost of banking regulation: a review of the evidence’, Federal Reserve System Studies No.171, pages 1-35; Feldman, R J, Schmidt, J, and Heinecke, K (2013), ‘Quantifying the costs of additional regulation on community banking’, Federal Reserve Bank of Minneapolis Economic Policy Paper 13-3. 8 Austen Saunders and Matthew Willison, ‘Measure for measure: Evidence on the relative performance of regulatory requirements for small and large banks’ (forthcoming). 7  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  contribution to the safety and soundness of small firms, a simpler regime will put in their place simplified or scaled back requirements. These will be less costly, but won’t make the firms they’re applied to less resilient. It’s worth saying here that a simpler regime will need to be assessed in the round. There are few, if any, requirements which make absolutely no contribution to small firms’ safety and soundness. That means that we may need to tighten some requirements a little when we simplify others in order to keep the overall level of resilience the same. But our expectation is that the resulting package will be less costly overall whilst delivering the same level of safety and soundness.