In some cases, regulators did not have the resources or authority to keep up with a growing and innovative financial system, particularly during a period when some regulatory rules were being replaced with a risk-focused supervisory system. It has been very difficult for examiners to get large banks to tighten their operations, especially when the banks were generating tremendous profits.
If it gives the appearance of being late, the first step by the central bank is likely to cause a substantial revision of interest rate expectations and thus of the yield curve, strengthening the impact of the tightening.