Rodrigo Vergara: The Monetary Policy Report and the Financial Stability Report Presentation by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, before the Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 18 December 2012. The Monetary Policy Report of December 2012 and the Financial Stability Report of the second half of 2012 can be found at http://www.bcentral.cl. *  *  *  Introduction Mr. President of the Senate’s Finance Commission, Senator Jose García, senators members of this Commission, ladies and gentlemen, I appreciate your invitation to present our Board’s vision on recent macroeconomic and financial developments, their prospects and implications for monetary and financial policy. This vision is contained in detail in our Monetary Policy Report of December 2012 and our Financial Stability Report of the second half of 2012. The year that is ending has brought good news to our economy. The inflationary fears we expressed early in the year have abated. This year our economy will grow 5.5 percent. Unemployment is low, labor income is growing steadily and consumer and business expectations are optimistic. Investment is high by historic standards. A year ago, when we presented our reports to this Commission, we foresaw that the deepening of the Eurozone crisis at the time could have significant effects on our economy, including a major slowdown during 2012. It did not.
Provided the City is properly prepared - as it will be - and here I commend to you the Bank of England’s quarterly reports on the practical, preparations we have been making in London for the introduction of the euro from 1st January next year - available, amazingly, at no charge from the Bank - then there will be a vigorous Euro-euro market in London, from Day 1, just as there are vigorous markets in Euro-DM and Euro-francs as well as Euro-DM and Euro-Yen now. If not our dowry exactly - since we are not entering into the marriage at this stage - it will be our wedding present. The wholesale financial markets in the UK derive their strength from London’s position as a uniquely international, rather than simply a national or regional European, financial centre. This reflects the critical mass of markets and financial services in commercial and investment banking available in London including the strongest financial businesses from all around the world. For instance, there are more banks operating in the City which are incorporated abroad than there are domestic banks, and more than half the total deposit base (over £ trillion) of the UK banking system is denominated in foreign currencies. And, the fact that so many foreign-owned institutions including very many from our European partner countries - continue to build their presence in London, suggests that they share this perception. The City in this capacity is, I know, seen as something of a mixed blessing by some people on the Continent.