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Chile Allows Financial Institutions to Provide Various Services
In Chile, financial institutions are authorized to provide a range of services, including financial advice, agency services for local and foreign institutions, entrusted activities (comisiones de confianza), and banking-related services.
Private Banks
Chile’s private banks offer a variety of services, similar to those offered by universal, commercial, and retail banks.
Other Banks
In addition to private banks, other types of banks operate in Chile, including:
- Universal banks
- Commercial banks
- Retail banks
Regulation of Systemically Important Financial Institutions (SIFIs)
The Superintendency of Banks and Financial Institutions (CMF) is responsible for determining which financial institutions can be considered SIFIs. The CMF has established a set of factors to determine the importance of an institution, including:
- Size
- Interconnectivity
- Replaceability
- Complexity
According to the CMF, the list of SIFIs will be published in March 2021, and additional capital requirements will need to be fulfilled over the next three years, with 100% compliance reached by 2024. The CMF may also require additional capital from SIFIs to increase their technical reserve or decrease their margin of interbank indebtedness.
Organisation of Banks
In Chile, banks must be incorporated as corporations and comply with specific requirements outlined in the General Banking Act and Corporations Act. The main body of a bank is its board of directors, which is responsible for directing the bank and managing risk. The internal organisation of banks is overseen by the board of directors, which:
- Establishes strategic objectives
- Sets corporate values
- Defines lines of responsibility
- Monitors and holds accountable
Banks must also establish proper disclosure mechanisms and promote sound internal controls and effective audit practices.
Appointment of Auditors and Other Experts
Banks must appoint external auditing firms to review their:
- Accounting
- Inventory
- Financial statements
And report on their findings to shareholders and the CMF.
Supervisory Regime for Management of Banks
The supervisory regime for management of banks in Chile is focused on assessing the quality of risk management used by banks. The main objective is to evaluate the effectiveness of a bank’s risk management processes, and ensure that they are adequate and aligned with international best practices.
According to the CMF’s Guide to the Banking Supervision Process, the supervisory approach in Chile is based on a “Supervision Based on Risks” (SBR) approach, which reflects the maturity of the banking industry in the country.