There is ample evidence that economic and financial informality—albeit a rational alternative for people with little choice—is a major obstacle for emerging economies to grow in a more inclusive way. Thus, while central bankers would normally emphasize that their focus is on short-term macroeconomics and price stability, there is little doubt that a more efficient, deeper and inclusive financial system would make things substantially easier for them and would provide a lasting push for development. What difference can FinTech make? [SLIDE 11] The central bank and commercial banks have been traditionally close because maturity transformation and fractional banking is in the DNA of universal banking, that is, the ability of commercial banks to provide a large set of interrelated services to the public. 7  Central Bank of Chile 29 June, 2017  In contrast, FinTech refers to those technologically enabled innovations in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.1 Thus defined, the scope of products or activities that can be catalogued as FinTech is quite broad. Moreover, products or services that are nowadays commonly or massively used could have been considered FinTech, e.g. banknotes, cheques, credit cards, ATMs, and electronic transfers. What makes a difference today is partly the speed at which change is happening and how different developments—programming, encryption, mobile devices—can combine to produce new financial services.
Slide 3  Commercial bank balance sheet Banking sector balance sheet (percent of GDP) ASSETS Loan Portfolio Commercial Consumer Mortgage Comex Cash Other liquid Derivatives  88 48 10 24 5 7 12 5  Other  9  LIABILITIES Demand deposits Time deposits External credit Debt instruments Derivatives Other  22 46 5 23 5 11  EQUITY AND RESERVES 10  All figures as of December 2016, based on individual balance sheet. Source: Central Bank of Chile based on SBIF data. [SLIDE 4] Hence, a key concern of a central bank is risk. Risk from external shocks that may threaten price stability; risk of misjudging the macroeconomic scenario and make wrong policy decisions; risk of changes in the behaviour of banks that may compromise the transmission of monetary policy to market rates; risk of liquidity excess or shortage in the banking sector; risk of bank insolvency; risk  3  Central Bank of Chile 29 June, 2017  of disruptions in the flow of funds at the interbank or retail level; risk of risk misjudgement, and, ultimately, risk of compromising trust. Slide 4  What do central banks worry about?