In the context of a flexible exchange rate, access to forex hedging with the proper regulation and supervision is certainly important for the various players. Chile has made great advances in this area with a derivatives market that has increased as a fraction of GDP, being above the average of Latin America and other emerging economies. In this context, it is important to expand the information system of derivatives, which allows to further approve the internationally accepted standards to "Transaction Repositories", which are currently considered as important as other types of financial infrastructures, such as Central securities depositories, counterparty entities and payment systems. Summing up, we believe that there is a series of legal changes that will enable the Chilean financial system to improve its efficiency and stability, providing the necessary tools for agents to make better decisions and foster growth. This, together with monetary policy oriented at keeping inflation stable over the medium term, is the best contribution the Central Bank can make to our country’s development. Dear senators, In the second quarter of last year there was a change in Chile’s economic scenario, with sluggish demand and lower inflationary pressures, that were particularly visible in low numbers for activity and prices at the end of 2016 and early 2017. As incoming data allowed to gauge the nature and magnitude of this change, the Bank adjusted its monetary policy by cutting the policy rate by 100 bp in five months.
On the other hand, its implementation may be a bit too ambitious and a difficult task for our countries. Therefore it is in our interest to find ways to make it more suitable to our needs by following a gradual approach rather than jeopardising its success through an uninformed adoption. 1  According to Basel II, the assessment of the borrower’s credit risk will depend on the performance of the economy, whether it is in a upward or downward trend. In the worst case, when the economy will be wholly swept in recession, banks will have automatically either to increase the level of capital, or shift towards less risky assets, that most intuitively calls for a slow down to provide loans thus engendering credit crunch and further recession.