Banking Regulations in Chile: Organizational Requirements and Supervisory Regime
Chile’s banking regulations are designed to ensure stability, security, and transparency in the financial sector. This article provides an overview of the organizational requirements and supervisory regime for banks in Chile.
Organizational Requirements
The organizational structure of banks in Chile is governed by specific rules and guidelines. The following are the key points:
Board of Directors
- Composed of at least 5 members and a maximum of 11, with an odd number of directors.
- Directors remain in office for three years and can be re-elected.
- Meetings must be held once a month.
Capitalization and Shareholders
- Shareholder contributions can only consist of cash in Chilean pesos, except in mergers or acquisitions.
- Public services, fiscal institutions, semi-fiscal agencies, state-owned companies, and public services created by law cannot be shareholders.
Corporate Governance
Corporate governance is a set of institutional instances, guidelines, and practices that influence bank decision-making. Banks are classified as Level A, B, or C based on their organizational rules, with Level A being the most compliant.
Definition of Corporate Governance
- A set of institutional instances, guidelines, and practices that influence bank decision-making.
- Level A, B, or C classification based on organizational rules.
Appointment of Auditors and Experts
The appointment of external auditing firms is a crucial aspect of banking regulation in Chile.
External Auditing Firms
- Banks must appoint external auditing firms to review accounting, inventory, and financial statements.
- Shareholders’ meeting must appoint external auditors within the first quarter of each year.
Supervisory Regime
The supervisory regime is designed to ensure that banks operate in a safe and sound manner.
Director Requirements
- Directors cannot be directors or employees of any financial institution, in a position appointed by the President of the Republic, an employee of a state company or associated public entity, or an employee of the same bank (except for a maximum of 90 days).
- Must fulfill certain 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 depositor safety.
Supervision Based on Risks (SBR)
- The main objective of banking supervision is assessing the quality of risk management used by banks.
- Reflecting the maturity of the banking industry in Chile.