However, due to the existing flaws in the financial system and distorted incentive structures, the rating agencies issued unrealistically high ratings to new issuances, thereby contributing to the build-up of systemic risks. The crisis shows that the systemic risks posed by the immensely complex financial system were masked by the benign macroeconomic outcomes characterized as the “great moderation”.
When inappropriate policies are followed, the damage can take years to undo. But when the right adjustments are made quickly, the whole economy can benefit. As business people making your own adjustments to future economic challenges, you can count on the Bank of Canada to pursue the appropriate monetary policy to help you get on with the job. 4  BIS Review 10/2004