Weighing all these factors, on July 14th we announced an FX intervention program, completely sterilized, very similar to the one conducted in 2019 consisting in spot and forward sales and a preventive liquidity program through FX swaps. These interventions are exceptional tools to provide a backstop on destabilizing dynamics on financial markets. As a result of the intervention, we saw a moderation in all metrics of volatility and reduced frictions in the process of price formation. It is important to appreciate that coincidentally with the FX intervention announcement, the winds in the global markets became more constructive. Given this more favourable outlook, the program ended in September as planned. Regarding inflation, as stated before, its high level is the main challenge the Central Bank is facing. Beyond its high level, since June’s 2022 Monetary Policy Report there was an assessment that inflationary persistence was on the rise, amid constant and significant upside surprises in inflation and rising expectations in different timeframes. For these reasons the central bank could not stay still. Beginning early in July 2021 the Board decided to raise rates from the ELB at 0.5% to 11,25% in October of this year. This has been done swiftly and decidedly helping to resolve the macroeconomic imbalances that the economy accumulated. In fact, spending is slowing, the exchange rate has appreciated in recent weeks and after a very long period of higher-than-expected inflation private agents start adapting to the environment by adjusting expectations downwards.

The opportunity to improve and enhance these tools based on their results should be considered, as well as the possibility of requiring higher capital and liquidity levels or more detailed contingency planning. Locally, we look forward to learning from other’s experience and improve our own work on impact evaluation and continuous assessment of the implementation of the Basel III reforms in Chile. In the near future, it is also relevant to note that part of the pending issues our country has in closing regulatory gaps relates to strengthening the local financial safety net through the development of a financial resolution framework (including a proper deposit insurance scheme) and implementation of Emergency Liquidity Assistance framework for the Chilean financial sector. Looking ahead, it is also important to bear in mind the challenges associated to digitalization and new business models in the financial sector. Modernizing financial regulation and risk management also entails identifying potential risks and defining a regulatory perimeter that addresses the increasing pressure of digital developments (such as those of new business models developed by Fintechs, stablecoins, Central Bank Digital Currencies, Decentralized Finance, among others). Linked to it, operational resilience and cybersecurity have become a relevant issue for the financial industry. 15  In this sense, regulation aim to set minimum standards that can guarantee the adequate functioning of financial services when it comes to face operational and cyber risks. Lastly, it is also key to assess the risks posed to and by financial institutions data infrastructure and data use.