this framework combines bank - specific measures with macro prudential actions to contain potential systemic risk. in this respect, one of the new tools is the countercyclical capital buffer : an additional capital requirement that could be activated and deactivated by the central bank depending on the state of the financial cycle, and whose main goal is to preclude the incubation of systemic risks and increase the resilience of the system as a whole. still, there are a few challenges ahead that we need to address to have an even more robust financial system. in particular, two tasks seem more urgent than others. namely, resolution of financial institutions and deposit insurance. while the new banking law includes some provisions in this respect, by introducing stronger early - intervention measures, these need to be further based on agosin et al. ( 1999 ) and espinosa and fernandez ( 2015 ). page 4 of 5 central bank of chile march 2019 developed to provide a comprehensive framework to deal with banks in trouble or on the brink of insolvency. once the preparatory phase of the general banking law, including a unified supervisor, is fully completed, we hope that the central bank and the government can advance in drafting a legal proposal on these issues. certainly, these areas will be important points in the imf ’ s financial sector assessment program ( fsap ) update of 2020, and it is important that we get there with the job well advanced. acknowledgements finally, allow me to thank the presenters for sharing their interesting research insights here with us in santiago. i also thank the organizers from the central bank of chile and the iadb in putting together this rich agenda from which we will certainly distill conclusions to guide our work forward. in particular, i would like to thank alejandro jara, markus kirchner, andres fernandez, victoria nuguer, and liliana rojas - suarez for setting up the agenda, and to tomas gomez, paloma navarro and maria jose reyes for the excellent organization of the event. i wish everyone a very fruitful discussion and a pleasant stay in santiago. * * * references espinosa, c. and j. fernandez ( 2015 ). “ comparacion historica de resultados en el sector corporativo en chile ”. economia chilena, vol. 18, no. 1. agosin, m., g. crespi, and l. letelier ( 1999 ). " explanations for the

calani. page 1 of 5 central bank of chile march 2019 to 0 % in the fourth quarter, and to minus 14 % in 1982. that same year, unemployment reached a record of 25 %, and businesses all over the country were seriously hampered, ultimately affecting their payment compliance. banking profitability went quickly to negative territory and the delinquency rate quadrupled to 15 % of the total portfolio, putting several banks solvency and operations at risk. several factors contributed to the deterioration of the macroeconomic environment in 1982. external interest rates rose, the availability of external credit decreased, and terms of trade worsened in the wake of the escalation of oil prices. this put enormous pressure on the chilean peso — which had been under a fixed exchange rate scheme since 1979 —. this regime broke down dramatically and spread to almost all business sectors, given large fx exposures, and heavily leveraged financial conglomerates. all these factors interacted with one another to become an outright banking crisis. but, whatever the causes of the crisis, unsustainable debt was mostly explained by internal vulnerabilities : inappropriate regulation, weak supervision, and lack of attention to excessive credit growth, leveraged on a fixed exchange rate scheme. although the first aid took the form of “ emergency loans ” by the central bank to commercial banks, during the following year conditions deteriorated rapidly enough to lead to the intervention of 11 banking institutions. another 8 were added in 1983, including the two largest banks in the system. in all, the intervened institutions represented 60 % of total credit. all directors and executives of these institutions were, removed from their posts, and replaced by provisional administrators. measures to fight the crisis aimed at the liquidation of non - viable banking entities, improvement of balance sheets of viable entities through the purchase of deteriorated portfolios, and the reduction of financial burden of bank borrowers through debt reprogramming and preferential exchange rates. in 1985, this extended to the recapitalization of the intervened banks, through the so - called “ popular capitalism ” program. perhaps the most important program was the purchase of deteriorated portfolios by the central bank under a variety of schemes, including repurchase agreements, and in exchange of debt instruments, liquid resources, and a new liability called “ subordinated obligation ”. the impact of these programs on the assets side of the central bank balance sheet was huge, and so were the costs of the complete rescue plan. altogether, it is estimated that