11  The Bank will complement this by intensifying its dialogue with key market players and observers, in order to strengthen its capacity to identify and interpret new developments that influence the behavior of the financial sector and the economy at large. Such dialogue with the outside world of both market players and regulators will also be part of a broader and more transversal effort to involve the technological dimension in the different areas of our work. Through several concrete initiatives, including technological laboratories and an observatory, we will enhance our capacity to comprehend, analyze and formulate hypotheses about the impact of disruptive technologies on the Bank's business model and financial intermediaries, adopting innovations that can help us maintain the quality and availability of the services provided by the Bank. We also aspire to perfect the regulatory framework in a timely manner in order to advance in those areas that offer an opportunity to strengthen the financial system and mitigate risks in the event that some of these disruptive technologies become accessible to everyone in the financial industry. Our 2018-2022 strategic plan also includes various initiatives to strengthen the Bank's insertion in its economic and institutional environment. I can mention some efforts to simplify regulations, ensure environmental and financial sustainability, active transparency and financial education. With this we seek to reflect that the Central Bank of Chile, despite being an autonomous institution of an essentially technical nature, is recognized as part of the society in which it must lead by example as an organization.

This “procyclical systemic instability” of the system is itself a complex concept which calls for analysis of the interplay between diverse  BIS Review 161/2009  3  phenomena such as: herd behaviour, contagion from common or correlated exposures, counterparty relationships, and undesired procyclical effects of prudential rules, of accounting rules, of behaviour of credit rating agencies, etc. Another important domain in assessing systemic risk is the analysis of the inter-linkages between the financial sector itself, taken as a whole, and the real economy. Financial imbalances often mirror real-economy imbalances. The adverse feedback loop between a fragile system, prone to procyclicality, and the real economy might be devastating, as has been demonstrated by the recent crisis experience. This means that unsound macro-policies over time, including macro imbalances, can themselves trigger financial imbalances, which in turn would aggravate instability and fragility in the real economy. Sources of systemic risk are particularly difficult to assess. By definition, they stem from the interrelations between the various elements in the system and are hence inherently complex. We know that the evolution of systems under stress is particularly difficult to capture. Furthermore, the materialisation of a risk is very often a sharp, abrupt and rapid non-linear phenomenon which calls for non-standard analysis. For example, in a very large and highly complex financial system, the channels through which risks are propagated are very difficult to capture comprehensively. A deep understanding of leverage, correlations and concentrations of exposures is key in this respect.