José De Gregorio: Tackling the capital inflow challenge Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the Bank of Spain, the IE Business School in Madrid, and CEMLA’s Meeting of Central Bank Governors of Latin America and Spain in Buenos Aires, the three of them in May 2010. *  *  *  I thank the valuable comments of Kevin Cowan, Pablo García and Enrique Orellana. The last few years have brought unprecedented challenges to macroeconomic management in small, open economies. The severe inflationary shock that began in 2007 was followed by the worst financial crisis since the Great Depression and a worldwide economic recession with no match in the postwar period. Today, a while after the immediate resolution of the crisis, we face new challenges. On the one hand, some developed economies, whose public finances were severely damaged by the great recession, now face a period of drastic macroeconomic adjustments and, in some cases, uncertainty about how their debts will be restructured. On the other hand, a substantial segment of emerging economies, which suffered no permanent damages in the balance sheets of their households, firms, or governments, is currently experiencing what can be an incipient start of a credit and economic rebound. The new momentum of capital inflows mirrors this phenomenon. The current status of these inflows and how to deal with them are a substantial part of the challenges we face today and the substance of this document.
iii)  Third, a domestic card association had indicated early on that it would build a shared NFC platform for its member banks, which is able to support over 20 banks  3  Based on statistics from Octopus, HKICL, HKMA. BIS central bankers’ speeches  3  to provide NFC payment services. The project would to a large extent achieve the objective of having a piece of interoperable infrastructure. 23. So far, the market-driven approach has served us well. One stored value card company has launched such services, so have four other banks, in partnership with two major card associations. By the end of this year, the shared NFC payment platform I mentioned should be ready for operation. IV. Sound regulatory framework  24. While Hong Kong is well-positioned to capture business opportunities brought by mcommerce, we need a legal and regulatory framework to address the related risks. With that in mind, the HKMA and the Financial Services and the Treasury Bureau are jointly proposing a regulatory regime for stored value facilities and retail payment systems in Hong Kong. 25. Under the new framework, multi-purpose stored value facilities would need to be licenced and observe a set of regulatory requirements. For instance, it must have a physical presence in Hong Kong and must be a body corporate under Hong Kong law. The issuer must meet a minimum ongoing capital requirement of $ million. There are also “fit and proper” requirements on management and ownership. 26. Of particular importance is the need for adequate consumer protection.