Regarding financial markets, credit growth in Chile has been robust, although it has decelerated recently, and house prices have increased at a steady rate, but we see no reason to be especially worried about these developments in the short term. Nonetheless, as we have repeatedly mentioned in our Financial Stability Reports, we closely monitor developments in financial markets to act in coordination with the other members of the Financial Stability Council if needed. Under these conditions, we think a normalization of the global monetary stance is a welcome and necessary development and we believe we are in a good position to face it. 6  4  Krishnamurthy and Vissing‐Jorgenson (2013). BIS central bankers’ speeches  Nonetheless, these are not times to be complacent. There are various issues and risks to be aware of. First, a prolonged persistence of the global liquidity conditions could result in sustained capital inflows to emerging economies. This may fuel vulnerabilities to a point where they become dangerous, especially now that the reduced growth prospects in emerging economies may channel new capital inflows towards consumption rather than to investment. Second, as I mentioned before, a volatile exit from quantitative easing is a relevant risk scenario. Market reactions to the announcements of future tapering have been relatively moderate so far. But the actual tapering has not yet begun, and there is considerable uncertainty about its exact timing and consequences. On this front we are still in unchartered territory.

Expertise in the analysis of financial sector issues, market and public intelligence provided by the EU authorities represented in the ESRB will be considered invaluable. However, assessments of a qualitative nature should, to the extent possible, be complemented by quantitative impact assessments, which will also facilitate the task of prioritising the risks and the decision to issue risk warnings. In short, if the European Systemic Risk Board is to really strengthen macro-prudential supervision in Europe, four conditions need to be fulfilled. First, a clear legislative framework must be created to underpin the work of the ESRB and the supporting role of the ECB. It should be noted that last June the European Council clearly indicated that the ECB should provide the secretarial, logistical, administrative and analytical support to the ESRB. Second, all parties involved in the preparation of ESRB risk assessments and potential risk warnings need to do the necessary analysis and research to bring our understanding of systemic risk and macro-prudential regulation to a new level, and to find common languages and frameworks. Third, in addition to improving the analytical tools supporting risk surveillance and risk assessment, more detailed and accurate information – to back up ESRB risk warnings – is essential. It should include better data coverage of non-regulated financial sectors, as well as more granular information on key node-institutions in the financial system and on potential inter-linkages between them. The ability to formulate concrete policy recommendations, as opposed to general recommendations, depends greatly on access to critical information.