This should lead us to reflect on how we can increase the macroprudential space available, thereby extending the capacity to mitigate the effects of future crises, both those originating in macrofinancial disequilibria that are endogenous in the economy and those arising from factors exogenous to the financial sector. Some national authorities, in countries such as the United Kingdom, have added flexibility to the implementation of the original CCyB framework developed by the BCBS to require the accumulation of a countercyclical capital buffer in the absence of warnings about systemic imbalances based on the credit-to-GDP gap metric. It would suffice for the economy not to be in a recessionary environment to call for a positive CCyB that can be released when any shock leading GDP to stand below its potential should materialise. Events surrounding the COVID-19 shock, from a source completely external to the financial system, have demonstrated the goodness of this approach in the use of the CCyB. This discussion has a bearing on other matters, such as the optimum level of capital that banks should maintain, and the most suitable composition of this capital: structural requirements versus cyclical/releasable requirements, microprudential requirements versus macroprudential requirements, and discretionality versus rules. It is, therefore, a complex discussion requiring detailed analyses well-grounded in empirical and theoretical evidence. Second, I would like to stress that we must also reflect in the coming years on the development of macroprudential policy for the so-called “non-bank segment” of the financial system, i.e. in the area of securities markets and insurance companies.

In terms of output, third quarter data showed a marked slowdown that continued into the beginning of the fourth quarter, but which has tended to dissipate according to incoming information. The most recent data show that this deceleration has continued, albeit at a slower pace than forecast. Likewise, as regards financial conditions, after a shift towards a tighter situation at the end of last year, more recently we have returned to a more normal situation. In particular, the monetary market frictions that occurred in late 2011 were quickly overcome after the Central Bank adopted transitory measures to provide greater liquidity. To go into more detail regarding Chile’s current economic situation, allow me to provide some background on the challenges we face in light of last year’s economic developments in our country. BIS central bankers’ speeches  1  The Chilean economy in 2011 In early 2011, several emerging economies, among them Chile, experienced an increase in inflationary pressures due to an episode of rises in international prices of commodities, particularly oil and some foodstuffs. Additionally, in Chile domestic demand, output and employment recovered quickly, helping close output and labor market gaps. Likewise, in the face of rising prices of oil and foodstuffs, the private sector’s inflation expectations rebounded, reflecting a greater risk of inflation. Core inflation measures remained at reasonable levels, below the minimum level of the target range. In this setting, the Central Bank Board decided to speed up the normalization of monetary policy during the first half of the year.