” in its broadest sense as it relates to these risk measurement and management processes is essential to the effectiveness of these processes. finally, i want to raise some issues around accounting and disclosure of risk. if there is a single theme to my remarks today, it is simply this : keep improving, refining, and innovating in risk management. although basel ii is a remarkable achievement, and the subject of this conference, don ’ t let your best practices be limited by what basel ii does or requires. indeed, one of the more desirable aspects of basel ii is that it anticipates that it can evolve with best industry practices without creating a new framework. the designers have not intended to build a straitjacket, and the policymakers have insisted on this characteristic, which my colleague vice chairman ferguson has referred to as basel ii ’ s “ evergreen ” aspect. enterprise - wide risk management within financial institutions, the better and greater focus on risk measurement has helped to bridge the gap between the perspective of the traditional credit risk officer and that of the “ quant. ” this is no small accomplishment, and a significant advance in credit culture. if you will pardon my use of stereotypes, historically the credit risk officer has been the fellow who always says “ no ” because it is the conservative thing to do, while the financial modeller has been the proponent of active - trading strategies that fulfil the promise of a data - mined efficient frontier that has been estimated to several decimal places of precision. the logic of risk and return in a competitive marketplace, as measured by return on economic capital that is founded in empirical analysis, has provided both sides with a common language and set of standards. it is not unusual anymore to hear chief credit officers describe their appetite for risk in terms of risk - adjusted return on capital ( raroc ) or monitor current spreads on credit default swaps to look for market signals on borrower credit quality. with better credit cultures and improved tools, institutions can also measure and evaluate more objectively the results of their business strategies and use that information to enhance future performance. they can decide how much risk to take, rather than letting their risk profile be the consequence of other decisions. the evolution of interest rate risk management in the united states is a great illustration of how an enterprise - wide approach can help institutions customize products that better serve customers, set prices to reflect risk exposures and attain profit targets, and ensure that corporate earnings contributions are met. thirty years ago, bankers

cross – border, mainly ), cbdcs, cybersecurity from a financial stability perspective, and big data and digital economy. on the other hand, the techlab ’ s objective is to implement in an experimental stage disruptive technologies that impacts cross - cutting processes within the cbc, such as cryptocurrencies, big data, artificial intelligence, and the page 2 of 11 central bank of chile september 2019 like. currently we are experimenting with blockchain and machine learning techniques. anyway, the techlab was started only three months ago and we are also exploring initiatives with other technologies such as apis. let us talk a little bit more about the technology that brings us together, blockchain. this technology has several use cases for a central bank : ( i ) central bank digital currencies ; ( ii ) financial market infrastructures such as largevalue payment systems and trade repositories, or more generally regtech or suptech implementations ; ( iii ) issuance and lifecycle of financial instruments ; and ( iv ) opportunities of optimization of back office processes, such as settlement of operations and reconciliation. notwithstanding the potential this technology has, there are some yellow flags that need to be addressed : a. dlt technology is still on an early stage and there might be unidentified drawbacks. smart contracts that can build on top of this technology make it significantly more powerful, but there is little experience on how this works in practice. b. borderless technologies raise concerns in regulatory compliance across regions. coordination and information sharing may be especially relevant. c. proof of work ( pow ) consensus protocol is slow and needs intensive use of energy. other consensus protocols have limited use at this point : proof of stake or proof of authority. page 3 of 11 central bank of chile september 2019 d. regulatory gaps may arise : identifying theses gaps is a central point in the exploration of the technology. therefore, we need to understand this technology in order to embrace its benefits and mitigate the risks that some use cases may involve. with that in mind, we started a project in collaboration with our local central securities depository ( csd ). this project explores the feasibility of issuing bonds in a blockchain platform, and managing the whole life cycle of the bonds in this platform. hence, settlement of primary auctions and corporate actions are done in blockchain. first, we discussed a conceptual model that would be a better fit to our regulatory framework. secondly, two