capital controls and capital flows in emerging economies : policies, practices and consequences, nber and the university of chicago press. edwards, s. and r. rigobon ( 2009 ), “ capital controls, exchange rate volatility and external vulnerability, ” journal of international economics, vol. 78, no. 2, pp. 257 – 267. marcel, m., m. tokman, r. valdes and p. benavides ( 2001 ), “ balance estructural : la base de la nueva regla de politica fiscal chilena, ” economia chilena, vol. 4, no. 3. for a review of the chilean experience, see cowan and de gregorio ( 2007 ). the only empirical study that found some effects of reducing the extent of the appreciation is edwards and rigobon ( 2009 ). however, the magnitude of such effect is small, since the elimination of capital controls from its maximum would have appreciated the exchange rate between 2 and 2. 5 %. in any case, it is useful to recall that the highest real exchange rate appreciation in the last 20 years in chile occurred in 1997, the year that featured capital controls, massive reserve accumulation, an exchange rate band and high interest rates. bis central bankers ’ speeches figure 1 world growth ( * ) ( anual change, percent ) - 3 - 6 - 9 - 12 - 15 - 3 - 6 - 9 - 12 - 15 world at market exchange rate chile ( * ) gray area denotes forecast published in the december's monetary policy report. for chile, considers the midpoint of the projected growth range in 2011. sources : central bank of chile and imf. figure 2 inflation indicators ( annual change, percent ) - 3 - 3 cpi cpix cpix1 cpi excluding foodstuffs and energy sources : central bank of chile and national statistics bureau. bis central bankers ’ speeches figure 3 inflation by components ( annual change, percent ) - 10 - 10 - 20 - 20 - 30 - 30 - 40 - 40 electricity fuels foodstuffs cpi cpix1 sources : central bank of chile and national statistics bureau. figure 4 domestic market rates in us $ and clp ( percent ) jan. 08 jul. 08 jan. 09 time deposits ( $ ) jul. 09 jan. 10 jul. 10 jan. 11 libor + spread on - shore ( us $ ) ( 1 ) 90 days. ( 2 ) traded on the chilean stock market.

influence the effectiveness of the bank ’ s internal governance, the soundness of its risk management, and therefore the very sustainability of its business. but structure and design are not the only elements that determine how robust a bank ’ s governance framework is. the behavioural patterns exhibited by management and staff, as well as the drivers that underpin that behaviour, are no less important. a bank can have all the risk controls in place, avail itself of the most advanced tools to manage risks, and rely on data of the highest quality, but still become mired in a scandal it has brought upon itself, which badly affects its reputation owing to weaknesses in its internal culture. it is one thing that someone decides to take on too much risk, to put the immediate interests of the bank before its longer - term interests, or even to break the law. it is another thing if such unwarranted behaviour is not adequately addressed. if such acts have no apparent consequence, that will be noticed by a colleague. and then by another, and then by ever more colleagues. and soon enough, a new group norm is established. misguided decisions are often rooted in each person ’ s values and beliefs, as well as their perception of what behaviour is valued within the structure around them. the overriding behaviour and culture within an organisation are thus the product of both individual behaviour and the underlying culture that acts as a breeding ground for that behaviour. it is important for a bank to identify and be aware of the structures, beliefs and group dynamics which echo throughout the entire institution and which may pose a risk to its performance and stability. banks ’ management bodies should be attentive to these intangible but real underlying drivers of behaviour and, if warranted, acknowledge the need to shift the paradigm before it is too late and negative practices become the norm. could there be a role for us as supervisor? whereas we look at elements like the composition of a board as part of a more standard governance assessment, in a broader supervisory governance assessment, including behaviour and culture, we could, for example, seek to identify the patterns of board discussions. which subjects generate tension? which topics tend to be neglected? which board members are the most influential when it comes to making a decision? do board members include the bank ’ s declared set of values and norms in their decision - making? do they walk the talk, when facing the rest of the organisation? are discussions in the boardroom or between members of executive committees dominated