me now give you a brief description of some of the main topics covered in this issue of the report. this issue examines the same external risk scenarios i just described. from the financial stability standpoint, we conclude that the risks coming from the u. s. and the eurozone have subsided, shifting the focus to the chinese economy as the primary source of risk. the report also stresses that if these scenarios come true they may have consequences in chile, given the domestic economic slowdown. locally, corporate indebtedness has increased in gdp terms. companies reporting to the superintendence of securities and insurance ( svs ) are posting relatively high debt levels by historic standards and profitability is shrinking. although these tendencies are consistent with corporate patterns observed in other economies, they do signal a reduction in the sector ’ s resilience to possible sharp adjustments in the economy ’ s dynamic. finally, in the past year, the figures of banking commercial credit repayment have deteriorated somewhat in some of the more pro - cyclical sectors, but on aggregate they are still on the favorable side. bis central bankers ’ speeches the real - estate market dynamic has not changed much from earlier iefs. new home sales are still strong and inventories are low. in this context, various indicators show that housing prices continued to rise in 2013 ( figure 9 ). although the upward trend is generalized across geographic zones, some are increasing faster than others ( figure 10 ). the office space market has increased the vacancy rate, and is expected to increase further as new projects enter the market. still, it is worth mentioning that recent quarters ’ indicators show a slight decline in the percentage of loans that cover a high portion of the property ’ s value, the bank lending survey reports somewhat tightened credit standards and the business cycle has resulted in a slower pace of total lending growth, although mortgage credit shows a smoother trend. i cannot stress too much how important it is for the agents involved to consider when making their investment and financing decisions that the future behavior of prices might take a detour away from recent trends. household borrowing risks remain stable. total household debt rose a little in the last quarter of 2013. in banking debt, there continues to be a shift in composition towards middle to upper income, with faster growth in borrowed amounts than in the number of debtors. repayment indicators for both bank and non - bank providers show no major change, probably because of a change in composition of the consumer portfolio or because a milder

impact of the business cycle on the labor market. banks have been gradually reducing growth in commercial credit and, while less, also consumer credit, reacting to the economic slowdown. indicators also show a reduction in the exposure to the most pro - cyclical sectors, which has been visible in stable aggregate default levels in both portfolios. banks ’ profitability increased somewhat in the past few quarters, while their capitalization levels have remained stable. stress tests show that the banking system ’ s capital levels are still sufficient to absorb the materialization of a severe stress scenario, although if such conditions occur it would affect profits somewhat more than was assessed in previous iefs. the less favorable stage of the cycle could imply higher credit risks. on one hand, those households more exposed to the cycle would take a turn for the worse in their repayment behavior should the labor weaken significantly. on the other hand, the deterioration in the past year of some economic sectors in the commercial portfolios could intensify if the slowdown becomes sharper. thus, the level of provisions set aside in each case is one important element that could cushion the impact of such risks. as i said, funding costs are low, with near record - low long - term real interest rates. however, one cannot rule out a reversal or new episodes of volatility. thus, it is still important to diversify by sources and maturities of external and internal credit. a large segment of the banking industry has advanced in that direction, but some smaller banks continue to depend heavily on local wholesale suppliers. some reflections to wrap up. final remarks we have been seeing a rise in inflation for some months that has taken y - o - y figures up past 4 percent. the forecasts in this monetary policy report indicate that this is a temporary development associated with the depreciation of our currency, and private expectations corroborate this, as a normalization of inflation over the coming months is foreseen. the board of the central bank of chile continues to monitor this situation with special attention. at the same time, the chile economy is in a phase of slowdown in output and demand. as we have said before, a significant part of this slowdown is due to how our economy is affected by the developments in the world economy and the normalization of our exports ’ prices. the weakening of mining investments had taken a toll on the labor market and other bis central bankers ’ speeches sectors of the national economy. the expectations of entrepreneurs and