Central Bank of Chile

Useful pages on the regulator website

Key individuals

Rosanna Costa Costa, President since February 2022 and member of the board since January 2017
Pablo García Silva, Vice President since February 2022 and member of the board since January 2014
Alberto Naudon Dell’Oro, member of the board since March 2018
Luis Felipe Céspedes, member of the board since February 2022
Beltrán de Ramón Acevedo, General Manager since July 2021
Juan Pablo Araya Marco, legal counsel since June 2014
Silvia Quintard Flehan, Oversight manager since January 2007

Regulatory oversight

The Central Bank of Chile (Central Bank) is an autonomous body created by the Chilean Constitution. It is responsible for overseeing the stability of Chile’s currency and the proper operation of internal and external payments.

Its functions and operations are governed by the rules of the Constitution and those set forth in Law 18,840, the Constitutional Organic Law of the Central Bank of Chile, enacted in October 1989, last amended on 8 September 2020.

The Central Bank’s corporate governance is vested in a board of five members, all appointed by the President with the consent of the Senate. The board has overall responsibility for the management of the Central Bank and exercising its functions.

The Central Bank has been granted the following authorities and powers (among others):

Issuing regulations and terms and conditions applicable to banking entities, financial institutions and savings and loan cooperatives relating to borrowing from the public through deposits, loans, participations, assignment or transfer of commercial paper, derivative agreements and so on.
Authorising banking entities to pay interest on bank accounts.
Issuing regulations and setting limits for banking entities, financial institutions and savings and loan cooperatives on the ratio between assets and liability operations.
Setting reserve requirements.
Issuing regulations for issuers or operators of credit, debit or prepaid cards or similar payment methods supervised by the Financial Market Commission (Comisión para el Mercado Financiero, CMF).
Authorising and regulating payment systems in Chile involving banking entities or other financial institutions supervised by the CMF for the acceptance, clearing and settlement of payment orders of money obligations, whether in Chilean or a foreign currency. The Central Bank can also recognise payment systems established abroad to allow banking entities and other financial institutions supervised by the CMF to participate in these systems.
Requesting that certain foreign exchange transactions be reported to it by the intervening parties, and to request that such transactions be conducted exclusively through the Formal Exchange Market, as defined below.
Authorising banks to perform certain investments abroad.
Agreeing on the issuance or amendment of certain foreign exchange regulations enacted by the CMF.

Reporting and disclosure obligations

Pursuant to article 40 of its Constitutional Organic Law, the Central Bank is empowered to request that certain foreign exchange transactions be reported to it by the intervening parties. The rules that govern the reporting obligations of foreign exchange transactions are set forth in the Compendium of Foreign Exchange Regulations (Compendium) issued by the Central Bank, which contains a set of foreign exchange regulations divided into 14 chapters, including an operational manual and different forms.

Pursuant to Chapter XIV of the Compendium, any loans, deposits, investments and capital contributions made in Chile from abroad in excess of US$10,000 (or its equivalent in other currencies) need to be reported to the Central Bank in the terms and conditions set forth therein. Usually, the entity responsible for such reporting is the commercial bank that receives the funds in Chile, following the instructions of its clients. A similar rule, contained in Chapter XII of the Compendium, applies to loans, deposits and investments made abroad from Chile, also in excess of US$10,000 (or its equivalent in other currencies). Foreign loans and investments made by Chilean banks need to be reported as well to the Central Bank, as required under Chapter XIII of the Compendium. Chapters VIII and IX of the Compendium require that other foreign exchange operations (not covered by Chapters XII, XIII and XIV), including derivatives transactions, be reported to the Central Bank in the form and under the conditions indicated therein.

In July 2019, the Central Bank issued Chapter III.D.3 of the Financial Regulations Compendium of the Central Bank of Chile, which created the Integrated Information System on Derivatives Transactions (SIID) and its operational regulation (RO-SIID), to establish a trade repository to perfect OTC derivative markets. Its purpose is to create a new electronic and centralised registry of transactions, so to improve transparency, promote financial stability and prevent market abuses.

The following entities shall report to the SIID the respective information, based on the type and nature of the relevant transaction (participants): (i) Chilean banks; (ii) non-banking entities of the Formal Exchange Market; (iii) non-banking entities, subject to the oversight of the CMF; and (iv) other persons domiciled or with residence in Chile in general, regarding derivative transactions executed with persons domiciled or with residence abroad.

The implementation of the SIID is gradual, starting in November 2020 only with banking entities, and from May 2021, with the remaining participants. After the definitive establishment of the SIID, Chapter IX referred to above shall cease its effectiveness. However, whereas the two regulations are still in force, all the derivative transactions shall be reported through both mechanisms by the participants, except for, as of January 2022, those regarding Chilean banks and affiliates, and as of May 2022, regarding pension fund managers (AFPs), the two latter being, as of the indicated dates, subject only to the RO-SIID and not to Chapter IX rules.

Note that these are reporting obligations that need to be satisfied after the completion of the relevant foreign exchange operation and do not imply the prior approval or consent of the Central Bank.

Monetary sanctions and recent behaviour

The Central Bank is empowered to apply fines up to two times the total amount of the relevant transaction in the following cases:

If the relevant obligors (as determined in the Compendium) fail to report to the Central Bank such foreign exchange transactions that they are obliged to report, pursuant to the Compendium.
If the relevant obligors (as determined in the Compendium) fail to fulfil their obligation to enter a foreign currency into the country through the entities authorised by the Central Bank to do so – that is, banks, stockbrokers and other entities, which are known as the Formal Exchange Market – when such currency has come from international good exports, payments that have accrued abroad for the benefit of Chilean residents or other activities listed in article 42 of the Organic Constitutional Law of the Central Bank of Chile as determined by the Central Bank.

The Central Bank is also empowered to apply fines of up to 100% of the total amount of the relevant transaction in cases where there is a breach of the Central Bank’s rules regarding foreign exchange transactions different from those listed above. If for any reason whatsoever such total amount cannot be determined, the fine amount shall not exceed approximately US$200,000.

Note that, in practice, these powers are not frequently exercised by the Central Bank, and thus we are not aware of common sanctioning issues or of recent sanctioning procedures in this regard.

Non-monetary sanctioning powers and behaviour

The Central Bank has no non-monetary sanctioning powers, although in cases where the Financial Market Commission decides to revoke either a bank’s or payment card company’s authorisation to exist, such sanction can solely be applied with the prior approval of the Central Bank.

Recent and upcoming developments

Following the recommendations of Basel III, the regulations on capital requirements for Chilean banks were updated by Law 21,130, which increases such requirements from both a quantitative and qualitative point of view to address the risks associated with banking activities. Some of these innovations required the involvement of the Central Bank in setting new reserve requirements and approving specific regulations to be proposed by the CMF, which is the banking regulator. On 3 March 2022, the board of the Central Bank approved the amendment of Chapter III.B.2.1 of its Compendium of Financial Regulations, which sets new rules on management and measuring of banks’ liquidity positions and reserve requirements.

Separately, as indicated above, the Central Bank is in an advanced stage of development and implementation of the SIID, an integrated derivatives information system.

Finally, it is worth mentioning that the vacancy left after the resignation of Mario Marcel as a member of the Central Bank board, in order to become the finance minister under Gabriel Boric’s government, shall be filled by President Boric with the Senate’s consent. There is no mandatory time period to fill the vacancy.

Challenges

As explained above, the Central Bank has increased participation in the determination of the capital requirements of commercial banks in Chile being required to constantly coordinate the review of new regulations with the CMF in a manner so that the impact on the general operation and functioning of the market and its members are not disrupted.

Considering the above, on 15 July 2021, the Central Bank signed a collaboration agreement with the CMF, with the purpose of improving their mutual cooperation instances, coordination and the exchange of information, knowledge and technical support between both regulators, in light of the responsibilities each of them has in the maintenance of the financial stability, within the scope of their relevant authorities.

Likewise, the Central Bank indicates that although the Chilean economy is on a recovery path, the current scenario poses major challenges for the monetary policy management, including (i) dealing with an economy that is showing a recovery slower than expected, with certain weaknesses because of the effects of the covid-19 pandemic and Ukraine’s invasion crisis; (ii) returning to the traditional monetary policy framework and the pre-pandemic fiscal rule levels, (iii) devaluation of the local currency; and (iv) keeping the gradually rising inflation under control, for which the Central Bank, has gradually raised its benchmark interest rate, lastly on 5 May 2022, from 7% to 8.5%.

Interacting with the regulator

Pursuant to Law 20,730, or the Lobby Law, and its rulings, enacted by means of Decree No. 71 of the Ministry General Secretariat of the Presidency, lobbyists and particular interest managers that intend to interact with the regulator shall request an audience through the relevant forms available for such purposes in both paper form and on the regulator’s website (see https://leylobby.bcentral.cl/audiencia/solicitud-audiencia).

Public entities to which Law 20,730 and its rules are applicable shall register and publish all public audiences held in accordance with the above-mentioned regulations.

Notes for foreign investors

The Central Bank has no direct powers over foreign entities, although it is expressly authorised by article 54 of its Organic Constitutional Law to provide banking services to foreign financial companies and foreign financial organisations to the extent such services do not comprise financing. When entering into those agreements, the Central Bank is empowered to submit itself to foreign courts’ jurisdiction, to appoint attorneys abroad and to waive its foreclosure immunity (article 85 of its Organic Constitutional Law).

Other regulators it works closely with

Comisión para el Mercado Financiero (CMF): Financial Market Commission;
Ministerio de Hacienda: Finance Ministry; and
Consejo de Estabilidad Financiera (CEF): Financial Stability Council.

Banco Central de Chile

Country

Location

Regulated area

Chile

Santiago

Banking