In addition to that there is a strong argument that Chile owes its stability to improved and sounder banking regulations. The route of limiting short-term capital imports can only be taken, however, if the right direction is followed, if it is an interim measure and if it is complemented by strong and well designed prudential regulations. Otherwise, market confidence will be put at risk.
The institution of sound risk management practices would be an important pillar for staying ahead of the competition. Banks can, on their part, formulate ‘early warning indicators’ suited to their own requirements, business profile and risk appetite in order to better monitor and manage risks. Fifth, governance.