Corporate Governance Framework for Banks in Chile

Legislative and Non-Legislative Corporate Governance Rules

The General Banking Act (Article 40 et seq) and regulations issued by the CMF provide the general corporate governance framework for Chilean banks. Additionally, rules in the Corporations Act and its regulations also apply to Chilean banks, to the extent not amended by the General Banking Act.

Key Corporate Governance Rules

• The board of directors must have at least five members and a maximum of 11, with an odd number of directors.
• Directors remain in office for three years and can be re-elected.
• The board must meet once a month.
• The internal organisation of banks is mostly carried out by the board of directors, which must provide necessary governance of the banking entity through senior management, committees, and policies.

Organisational Requirements

The internal organisation of banks in Chile is governed by the following requirements:

Board Composition

• The board of directors must have at least five members and a maximum of 11, with an odd number of directors.
• Directors remain in office for three years and can be re-elected.

Board Meetings

• The board must meet once a month.

Appointment of Auditors and Experts

Banks in Chile (whether SIFIs or not) must appoint external auditing firms to review their accounting, inventory, and financial statements. External auditors must be appointed by the bank’s shareholders at the regular shareholders meeting, which must take place within the first quarter of each year.

Key Auditing Requirements

• Banks must appoint external auditing firms to review their accounting, inventory, and financial statements.
• External auditors must be appointed by the bank’s shareholders at the regular shareholders meeting.

Supervisory Regime for Management

The supervisory regime for management of banks in Chile includes the following requirements:

Eligibility Requirements

• A director of a bank (whether an SIFI or not) must not:
  • Be a director or employee of any financial institution.
  • Hold a position appointed by the President of the Republic.
  • Be an employee of a state company or other associated public entity.
  • Be an employee of the same bank (unless they are general manager for a maximum of 90 days).

Honourability and Solvency Requirements

• Directors must fulfill honourability and solvency requirements, including not being convicted of serious crimes, not being sanctioned by market regulations, and not having incurred in serious conduct that may risk the bank’s stability or the safety of its depositors.