adjustment ▪ inefficient intermediation of savings reduces the return on real investment and balance incentives in favor of speculation and rent - seeking ▪ underdeveloped financial systems are also prone to concentration and vertical integration, at the cost of clients and systemic risk [ slide 10 ] the latter are rather dramatic examples of the challenges posed by protracted financial development for price and financial stability, the twin goals of central banks. but such challenges can take many more shapes. a low coverage of banking and credit means that a substantial fraction of the population and companies may not have access to liquidity when they need it, nor credit to live through a contingency. liquidity and credit constraints prevent relative prices from resolving disequilibria, amplifying the impact of shocks on employment, production and consumption. inefficient intermediation of savings reduces the return on real investment and tilt incentives in favor of speculation and rent - seeking. shallow capital markets may be unable to hedge market risks, particularly exchange rate and term exposures, and foster concentration and vertical integration. underdeveloped financial services can also contribute to economic informality. what is the point in registering a business, complying with regulations and paying taxes if you cannot get funding for working capital or investment projects? the financial dimension of informality is shadow, unregulated banking, which is prone to insolvency, abuse and fraud. there is ample evidence that economic and financial informality — albeit a rational alternative for people with little choice — is a major obstacle for emerging economies to grow in a more inclusive way. thus, while central bankers would normally emphasize that their focus is on short - term macroeconomics and price stability, there is little doubt that a more efficient, deeper and inclusive financial system would make things substantially easier for them and would provide a lasting push for development. what difference can fintech make? [ slide 11 ] the central bank and commercial banks have been traditionally close because maturity transformation and fractional banking is in the dna of universal banking, that is, the ability of commercial banks to provide a large set of interrelated services to the public. central bank of chile 29 june, 2017 in contrast, fintech refers to those technologically enabled innovations in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services. 1 thus defined, the scope of products or activities that can be catalogued as fintech

experience with unconventional policies during the recent global financial crisis and our experience with financial rescues in our own financial disaster in the early 1980s. in the latter case, i will also touch briefly on the impact of rescues on the central bank´s balance sheet. 1. financial stability as a policy goal. the role of the central bank the recent financial crisis challenged the paradigm that the stability of the financial system could be preserved through a combination of micro regulation and macroeconomic stability. before the crisis, many countries focused financial regulation on the risks faced by individual financial institutions ( as indicated by basel ii ), and macroeconomic policy on the preservation of price stability. this approach may have worked well during calmed times, but it also may have allowed hidden financial risks to build up unchecked. as a result, there is growing consensus that the pursuance of macro financial stability has to be considered in its own right, in a way that combines micro regulation with a systemic view of the financial system. bis central bankers ’ speeches however, while there is consensus in the approach, there is still debate on what institutions should be in charge of ensuring financial stability, and in particular, what should be the role of central banks. there are advantages in having central banks involved in preserving financial stability, but these advantages do not necessarily mean that they have to be the sole institutions in charge. central banks have a systemic vision of the economy that allows them to visualize links between different players of financial systems and their potential consequences for the real economy. also, as lenders of last resort, the preservation of financial stability is of natural interest for central banks. thus, even if not formally in charge, central banks should and do care about financial stability. but at the same time, there are important risks in having central banks in charge of financial stability. first is the risk of diluting the mandate of the central bank and damaging its credibility. central banks have fought hard to establish credibility by focusing on measurable goals, maintaining clear communications with the public, and being transparent and accountable in achieving these goals. the focus on inflation, a simple observable variable has helped. having a central bank with multiple mandates creates risks of policy dilution and conflicting goals. in contrast with inflation, or even employment, financial stability is a fuzzy concept with many dimensions that are hard to encompass in a single indicator. attempting to do so risks ending with a narrow view of financial stability, but having a broader, less precise definition of financial stability makes it hard