Thus, in an OECD comparison, Chile is in the lower part of this ratio’s distribution (figure 16). Although the current capital levels are sufficient to absorb a possible severe stress scenario, gaps have narrowed. While every bank’s CAR exceeds the 8-percent regulatory minimum in the stress scenario, the share of banks having a CAR above 10 percent in such a scenario has dropped in recent years, to less than half the system’s assets in the latest test (figure 17). Let me conclude with some final thoughts. Concluding thoughts In the past several months the macroeconomic scenario has brought no big surprises, but that does not mean that challenges have been absent. Inflation has dropped in line with expectations, but remains above the tolerance range. Our projections indicate that in a few more months it will return to that range to then decline towards the 3-percent target. If this is so, we will have ended quite a long period during which inflation was at or above 4 percent and monetary policy-making has been particularly complex, as we have had to deal with a significant depreciation of our currency and the ensuing rise in prices, aside from the economic slowdown. Still we have been able to keep inflation expectations over the projection horizon well anchored to the 3-percent target. In the short term, there are obvious inflationary risks, which could again push back this convergence.
Ida Wolden Bache: Norges Bank's management of the Government Pension Fund Global Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the hearing of the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 18 April 2023. *** Thank you for the invitation and for the opportunity to talk about Norges Bank's management of the Government Pension Fund Global. 2022 saw substantial movements in global financial markets. Interest rates rose, and both equity and bond markets gave negative returns. The fund's return last year was equivalent to a drop in value of NOK 1 637 billion. In absolute terms, this is the weakest return in the fund's history. With such a large fund and an equity allocation of 70 percent, we need to be prepared for substantial fluctuations in returns The objective for Norges Bank's management of the fund is the highest possible longterm return within the constraints set by the Ministry of Finance. The Ministry has defined a benchmark index for the fund, and we manage the fund close to this index. Over time, the return on the fund has been higher than the return on the benchmark index. The Executive Board is satisfied with this. The excess return in 2022 was equivalent to NOK 117 billion. The Executive Board has overriding responsibility for Norges Bank's management of the fund. We adopted a new strategy for the management of the fund towards the end of 2022.