Then, this argument claims that the housing bubble was caused by monetary policy, which failed to act opportunely and permitted severe imbalances to accumulate. Nonetheless, one must bear in mind that soaring asset prices do not necessarily end up in a crisis like this one. Closer attention must be paid to the financial fragility that accompanied this process, whose main culprit was the unrestrained financial innovation that generated deep distortions that neither markets nor regulators were able to predict. An expansionary monetary policy can undoubtedly induce an excessive increase in the prices of assets and credit. The ultimate role of monetary policy is to smooth the business cycle and control inflation. 1 Therefore, it is possible to think that a very expansionary monetary policy, more so than that needed to reach the inflation target, can exacerbate an economic boom. Moreover, such a policy will have serious consequences on output once the monetary impulse is withdrawn. However, an expansionary monetary policy could not explain by itself the severity of the financial collapse and the global recession the world is seeing today. There are countries where monetary policy was expansionary, with interest rates at their minimum, and no housing bubble nor financial collapses occurred. A couple of examples are Canada and Chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the Fed Funds rate (Figure 1). Still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound.

Significant resources have been devoted by the Bank in the last two years to achieve these objectives. One of it was the relicensing process. We had reassessed a total of 839 money changing companies and remittance service providers and issued new licences to those that met the necessary requirements. We have also provided time for companies to improve their operations. These companies had demonstrated that they are able to comply with the required rules. For those that qualify the licensing processes, improvements in their operations could be achieved within a reasonable timeframe. We have also made it clear to the industry that companies found to be carrying out unauthorised activities will be firmly dealt with through enforcement actions. Out of the 839 licenses issued earlier, the relicensing process had reduced a total of 365 licenses as a result of revocation, merger, voluntary surrender of license or industry players themselves decided to convert to become an agent of a larger entity. We have significantly increased our interactions with the industry to help companies understand the regulatory requirements that must be observed. These engagements have also helped the Bank better understand the practical issues that are faced by the industry and we have responded accordingly to some of these issues. I can assure you that we will continue to work with the industry to find solutions to legitimate issues raised by the industry but the industry must act responsibly and with the public’s interest in mind. Enforcing compliance will continue to be an important focus of the Bank.