during discussion of the basel ii agreement, it was suggested that provisions should be its fourth pillar but this idea was, in the end, rejected by the developed countries because of potential conflicts with accounting norms. after the crisis, there is, however, renewed interest in provisions as a prudential instrument. the idea of applying some countercyclical rule has gained ground. several latin american countries have advanced in this direction and their experience should be followed with attention. mortgage operations, which are very closely related to the origins of the crisis, will need to be reviewed. the volumes and amounts committed to this activity are growing and have, without doubt, acquired systemic importance. this has implications both for the banking system, where these operations tend to originate, and for the securities market which provides the financing. the recommendations that warrant attention include the application of a prudent loan - to - value ratio taking into account cyclical fluctuations in the price of the dwelling, stricter requirements for institutions in the business of originating to sell, and the use of covered bonds to finance these loans so as to leave credit risk in the hands of the issuer while transferring market risk to the investors. this latter recommendation is backed by several successful experiences including that of chile with covered bonds. because the origins of the recent crisis appear to have been closely related to lax credit policies in the personal banking segment, commercial practices that lacked transparency and excessive household borrowing, it has brought the issue of consumer protection to the fore. although also a broader issue, consumer protection is related to the proper functioning and stability of the financial system, particularly if it is understood to include such important matters as financial education, transparency with clients and market behavior, it can, therefore, not be ignored when deciding within which institutional framework and with what policies to address this issue. 4. final remarks concern for financial stability is at the origin of central banks. it can, in fact, be said to be in their dna. although this concern had faded over time, the experience of recent years has again brought it very much to the fore. as a result, there is now broad agreement that central banks have an unshirkable role in this field and debate centers rather on the instruments they need to have. the crisis has left important lessons, especially for the developed economies where it had its origins. they have already begun to implement financial reforms in a bid to remedy the weaknesses that were observed. the emerging economies, although they did not experience the same problems, must

- 4 - 4 - 4 dec. 2011 report sep. 2011 report ( * ) gray area, as from fourth quarter of 2011, shows forecast. sources : central bank of chile and national statistics institute ( ine ). figure 8 nominal exchange rate ( index, 1 jan 2000 - 19 dec 2011 = 100 ) australia japan switzerland czech rep. n. zealand china brazil thailand canada peru colombia norway sweden malaysia philippines eurozone chile israel poland s. korea hungary u. k. south africa u. s. russia india mexico range average july spot ( 1 ) the range shows maximum and minimum values of the currency during indicated period. considers broad index. ( 3 ) at 27 junly. sources : central bank of chile and bloomberg. bis central bankers ’ speeches figure 9 actual and expected mpr ( percent ) mpr fos, first half december 2011 forward, forward december report 2011 ipom diciembre eee, december 2011 source : central bank of chile. figure 10 total corporate debt ( % of gdp ) 11. i 11. ii banks'external debt external bonds debt external non - financial debt bank debt factoring & leasing bonds 11. iii ( 1 ) total debt chilean non - financial firms. ( 2 ) fdi - related loans and commercial credits. ( 3 ) commercial & comex. ( 4 ) corporate bonds ( except codelco ), securitized bonds with non - banking underlying origin and marketable securities. source : central bank of chile based on data from achef, sbif, and svs. bis central bankers ’ speeches figure 11 households'banking risk indicators total borrowing ( percent ) past - due - portfolio indices ( percentage of loans ) 1, 6 1, 6 1, 4 1, 4 1, 2 1, 2 1, 0 1, 0 0, 8 0, 8 0, 6 0, 6 0, 4 0, 4 06 07 08 09 10 11 over wage mass over disposable income ( rdi ) mortgage consumer ( 1 ) preliminary data for third - quarter 2011 disposable income. ( 2 ) dotted lines show effective index average. source : central bank of chile based on sbif data. figure 12 cost of short - term external financing of resident banks ( basis points ; months ) jan. 08 oct. 08 spread spread jul. 09 apr. 10 jan. 11 oct. 11 maturity ( 1 ) non - related bank loans, at variable rate. gray area shows interval between percentiles 5 and 95