Mario Marcel: Capital flows and the migration of risks - the recent Chilean experience

Remarks by Mr Mario Marcel, Governor of the Central Bank of Chile, at the Session 4 "Next vulnerabilities: capital flows and the migration of risks to new corners of the financial system" at the High-level policy seminar on "Integration or Framentation? International Capital Flows in the Post-Crisis World", arranged by the OECD and the Ministry of Finance of Japan, as Governance of G20 in 2019, Paris, 11 September 2019.

1. Issues for discussion

a. Which new sources of vulnerabilities are building up a decade after the 2008 crisis?

- Risks associated with the growing importance of non-bank lenders. In some EMEs, this may result in credit lending going informal due to a relatively higher cost in credit provision due to regulation.

- Risks that can emerge from a less developed financial infrastructures outside the regulatory perimeter.

- Risks attributed to disruptive FinTech activities, such as the development of crypto-assets markets, as well as cybersecurity issues.

- Risks and challenges associated with the changing nature of banks' business model. In particular, those coming from the internationalization of banks' activities.

b. How to better consider a cost-benefit framework for financial regulation, such as currency-based measures (CBM)?

- While the banking regulation and supervision arising from the 80s-banking crisis was restrictive in several ways, it was supported by sound monetary and fiscal policies.