2008, the tranches rated by moody ’ s that were downgraded was close to thirty six thousand, where nearly one third of downgraded tranches bore the aaa rating. this is a complex issue, especially due to the prevailing incentives in this sector. a recurrent area of criticism on the incentives side is the simultaneous role of advisor and issuers of ratings. but the spectrum of potential conflict areas could be broader, and thus more efforts must be devoted to understanding in detail the operation and linkages of this industry. final comments the subprime crisis has opened a debate on the risks of financial innovation. it reminds us that higher levels of sophistication do not guarantee the normal operation of the financial system. a reasonable level of regulation, control and monitoring is required. i think we should move forward in innovation processes, as they are positive, but we must move forward with caution. it is important to implement policy changes gradually to provide an adequate level of information and transparency that will ensure an adequate assessment of the risks involved. it is also crucial to review in detail the incentives and potential conflicts of interest arising from the new tools and processes. another aspect that needs to be addressed is the role of adequate control systems and financial risk management. a proper system of financial risk control and management must start by defining policies at the highest level, the board of directors. it also requires the involvement of senior management in tracking and monitoring risk. and, ultimately, it needs the development of an organizational culture that is capable of properly combining the goals of profitability and leadership with risk sensitivity. in this regard, a topic that is central to the discussion of financial reforms is the overall structure of incentives of financial intermediaries. i believe this is an issue that all players in the financial system must follow with care. as a result of the current problems, we will observe more regulation in financial markets and everyone, even those of us not at the center of these difficulties, must remain watchful. problems of moral hazard, transparency and new ways to meet the requirements of central banks to provide liquidity are leading to a review of regulatory frameworks at the international level. we must be aware that more regulation leads to the search of ways of avoiding them, which may end up threatening financial stability. this last dimension must be taken into account in the analysis and regulatory proposals, which obviously introduces an extra element of complexity in this area. thank you. references allen f. and d. gale ( 2000 ).

of the economy has been determined largely by the swings in the 7 / 19 bis central bankers'speeches world economy. the end of the so - called commodity boom, the persistence of very expansionary monetary policies — both conventional and unconventional —, deflation replacing inflation as a macroeconomic risk and the profound transformations that the chinese economy has experienced, among others, are some of the large - scale phenomena that have generated major, even atypical, changes in the external scenario facing the emerging economies. these changes have been perceived especially clearly in chile. during the years of highlypriced commodities, especially when they were coupled with particularly low interest rates, our economy grew more than 5 % annually, the real exchange rate dropped substantially, and investment boomed. despite this, they were years of particularly low inflation, driven by the drop in many tradable goods ’ inflation. the situation changed dramatically in late 2013, when chile ’ s terms or trade reversed significantly. since then growth has been near 2 % and investment has receded, as has the current account deficit. between 2013 and 2015 the peso depreciated largely, pushing inflation above the tolerance range for longer than expected. the transition from high growth and low inflation to low growth and high inflation is certainly uncomfortable for any central bank. more so if this transition features an autonomous confidence shock as happened in our case. but we do not choose the shocks that hit us. what we can do is to deal with them and cushion their impact on the overall economy. this has been possible, to a great extent, because of our appropriate policy framework. this framework consists of an inflation - targeting monetary policy with a floating exchange rate. this makes it possible to adjust the monetary impulse so that projected inflation two years out stands at 3 %, allowing relative prices to adjust to changes in external conditions. in the context of the end of the long cycle of high commodity prices, this policy framework helped the economy to walk the path of the necessary adjustments it had to make, which required low real interest rates and a depreciated currency. thus, although inflation soared in the years 2014 and 2015, monetary policy was eased, because despite the higher inflation, we saw that medium - term pressures were pushing down. this countercyclical operation of monetary policy was accompanied by a policy of structural fiscal balance that allowed the budget ’ s automatic stabilizers to act. the combination of both elements and their rigorous application throughout the cycle allowed to attenuate its inherent