the policies we are developing from the central bank to contribute to strengthening and developing the financial markets, in accordance with our mandate of financial stability. 1. building resilience over the years as a source of strength 50 years ago, chile was an economy mostly closed to international trade and capital flows, with severe credit constraints and a fairly basic financial system, with banks as the only source of financing for businesses and individuals. since then, subsequent capital market reforms — together with the creation of the private pension system and the incorporation of other institutional investors and capital market openness —, changed the size, composition, depth, strength, and forward - looking vision of the financial sector in chile. all of these reforms led to a sound development of the chilean financial system. welldesigned public policies and public - private collaboration allowed our country to build a more complete and dynamic financial system, capable of channeling savings and investment to the financing of companies and projects. our country has been able to attract foreign investors like the ones present in the audience today, who trust in the professional quality of financial institutions and intermediaries and also in the robustness and technical quality of regulatory and financial supervision. chile is a small and open economy with a strong macroeconomic framework, flexible exchange rate regime, prudent fiscal policy, adequate regulatory framework and robust financial supervision and a monetary policy that carries the weight of stabilizing the cycle through a two - year inflation targeting framework. all of these have contributed to have solvent financial institutions and build up buffers to face difficult times. in this context, the exchange rate and capital market play a relevant role in absorbing external shocks. stable inflation and a credible framework have contributed to low levels of dollarization. meanwhile, the growing participation of non - residents and the institutional agents themselves have allowed the derivatives market to develop. those policies have been applied in a coherent and consistent manner for many years. most of the financial regulation developments have been carefully designed and implemented. while governments have changed, the goal to develop and improve the financial system has remained and therefore those announcements have progressively materialized. to provide a few recent examples that were addressed in previous chile day meetings, some of those measures include the implementation of basel iii banking regulation standards, the development of financial market commission ( cmf ) as a strong integrated financial supervision authority, and the agenda of the central bank towards the internationalization of the chilean peso, among others. this positive interaction of good policies and consistency in its implementation has greatly contributed

“ recent developments in the chilean financial system and challenges ahead ” rosanna costa, governor of central bank of chile chile day – december 12 and 13, 2022 – london, united kingdom good morning distinguishes authorities and dear friends. i am going to talk about the recent developments in the financial system in chile and the view of the central bank of the challenges ahead. introduction in december of last year, the former governor of the central bank of chile ( and nowadays the minister of finance ) presented in this very same forum in london about the developments and prospects of the chilean economy. by then, our country was going through a process of strong recovery from major shocks that affected our economy : first the social unrest of 2019 and then the pandemic of covid - 19. therefore, the discussion last year focused on the aftermath of the pandemic and the different measures that were adopted by the central bank and the government to mitigate its effects on the real economy. since july 2021, the central bank has been hiking the monetary policy interest rate, due precisely to strong pickup of household consumption driven by governmental aids and pension funds withdrawals. a year ago, the central bank also raised a note of caution for 2022 and 2023 due to the weakening of the capital markets, identifying several factors including the reduction of long - term savings due to pension withdrawals and its impacts on access to long - term financing for companies and individuals, risk of fiscal deterioration and persistent uncertainty, among others. during this year some things have certainly changed. internally, uncertainty has decreased after experiencing peaks at certain periods. key asset prices, such as interest rates and the exchange rate, have shown high volatility and, in spite of a reduction, have not returned to previous levels. externally, persistent higher levels of inflation have prompted a strong reaction by most central banks and uncertainty remains elevated. this driven by factors such as the war in ukraine and the likelihood of recession in us and eurozone. these elements add complexity to an already challenging scenario. yet, despite these difficulties and a weakened capital market, the financial system has proved to be very resilient. i will start this presentation with a macro - outlook, in particular at our continuing efforts to resume balanced growth on the back of a sound macroeconomy, by applying the appropriate monetary and exchange rate policy in times of high uncertainty and external shocks. then, i would like to share with you the factors that explain the remarkable resiliency of our financial system, and