Although wholesale funding plays an important role in market discipline, it is particularly sensitive to changes in perceptions about the risk of issuers and to the assets’ liquidity in the secondary market. In addition, the events of recent years show that negative developments in foreign or local financial conglomerates may adversely affect the cost of funds in the wholesale market for the banks belonging to these groups. Accordingly, it is important that banks maintain a diversified funding base in terms of counterparties and maturities. Also, banks should use in their liquidity management stress tests and contingency plans that appropriately reflect their risks, business strategies, financial condition and financing ability under different scenarios. In addition, it is important that banks properly internalize the economic and reputational risks of their exposure to related entities, for which a proper corporate governance framework is crucial. In this context, I would like to bring to your attention four regulatory elements. First, the Superintendence of Banks and Financial Institutions (SBIF) perfected its regulatory framework on corporate governance in banks. Second, based on the possible contagion effects in financial conglomerates the SBIF enhanced the regulations restricting transactions with related debtors, increasing their supervision tools in this area.
Figure 4  CPI inflation (*) (annual change, percent)  10  CPIEFE inflation (*) (annual change, percent)  10 10  10  8  8  8  8  6  6  6  6  4  4  4  4  2  2  2  2  0  0  0  0  -2  -2 -2  -2  -4  -4 -4  -4  07  09  11  13  15  07  Dec.2013 Report  09  11  13  15  Sep.2013 Report  (*) Gray area, as from the fourth quarter of 2013, shows forecast. Sources: Central Bank of Chile and National Statistics Institute (INE). 10  BIS central bankers’ speeches  Figure 5 MPR and expectations (percent) 9 8 7 6 5 4 3 2 1 0  9 8 7 6 5 4 3 2 1 0 07  08  09  10  11  12  13  14  15  MPR  FBS second half Nov. 2013  EES November 2013  Forward rate, Dec.2013 Report  Source: Central Bank of Chile. BIS central bankers’ speeches  11