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Chilean Banks Must Comply with Corporate Governance Requirements

Santiago, Chile - In a move to ensure transparency and stability in the banking sector, the Chilean government has implemented strict corporate governance requirements for all banks operating in the country. According to Article 27 of the General Banking Act, every bank must be a special corporation (sociedad anónima especial) with specific organizational requirements.

Board of Directors

The main body responsible for directing the bank is the board of directors, which is entrusted with the direction of the bank and proper risk management. Directors are prohibited from being both directors and employees of the same bank. The board must also adopt necessary measures to remain informed of the management and general situation of the bank.

Organization of Banks

Article 49 of the General Banking Act sets rules regarding the organization of banks, including:

  • Capitalization of shareholders’ loans
  • Restrictions on public institutions holding shares in a bank

Corporate Governance

The Corporations Act and its regulations also apply to Chilean banks, with some exceptions. The CMF’s Updated Compilation of Rules defines corporate governance as a set of institutional instances, guidelines, and practices that influence the bank’s decision-making process.

Importance of Good Corporate Governance

According to the CMF, good corporate governance is essential for ensuring transparency and adequate management and control of risk. The agency evaluates banks based on their organizational rules, classifying them as level A, B, or C, with A being the most compliant with management proceedings.

Auditors and Experts

The CMF also sets specific requirements for auditors and other experts, including:

  • External auditing firms that must review a bank’s accounting, inventory, and financial statements

Supervisory Regime

Article 49 bis of the General Banking Act prohibits directors from having certain affiliations or being convicted of serious crimes. The CMF’s Guide to the Banking Supervision Process outlines the agency’s approach to banking supervision, which focuses on assessing the quality of risk management used by banks.

SBR Approach

The SBR approach reflects the maturity of the Chilean banking industry and ensures that banks are held to high standards of corporate governance and risk management.