## Central Bank Transparency Code—Detailed Review: Central Bank of Chile (content unit 1chlea2021004) ## Source details **Canonical URL:** [Central Bank Transparency Code—Detailed Review: Central Bank of Chile (content unit 1chlea2021004)](https://www.imf.org/-/media/files/publications/cr/2021/english/1chlea2021004.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1chlea2021004.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1chlea2021004.pdf.json) --- ### Scope, objective, and methodology - Mission conducted a Central Bank Transparency Code (CBT) review for the Central Bank of Chile (CBC) at the CBC’s request; first review under the CBT pilot program. - Review scope: - Covers the CBT’s five-pillar framework, excluding principles related to functions not performed by the CBC and areas covered by separate international standards (denoted “Not‑Applicable”). - Purpose: - Evaluate CBC transparency practices by mapping choices against CBT best practices across (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. - Methodology: - Desk review based on CBC disclosures (website and other media) in English and Spanish, CBC self-review, and in‑depth discussions with CBC Board, management, staff, and stakeholders. - Principle‑by‑principle assessment considering (a) timeliness, (b) periodicity, and (c) quality of disclosure (accessibility and ease of understanding). - Mission dates: March 3–18, 2021. - Legal context noted: Transparency Law (Law no. 20285, 2008) and CBC Act (Law No.18840) underpin confidentiality and shape CBC transparency choices. ### Executive summary — context and high‑level findings - Economic and crisis context: - Chile recovered from slowdown after 2011 copper price decline; hit sharply by COVID‑19; activity started to recover after mid‑2020 with policy stimulus, though some sectors and labor market remain worse than pre‑pandemic levels. - CBC extraordinary COVID‑19 measures included purchase programs for commercial bank and central bank bonds, credit and liquidity lines, temporary balance‑sheet support for bank bonds during large pension fund withdrawals in 2020; coordination with financial supervisor and Ministry of Finance (MOF). - CBC transparency during COVID‑19: proactive engagement via special website section, presentations, press releases, social media; a March 2021 study reviewed monetary and financial policy response to COVID‑19. - Overall assessment: - CBC has implemented broadly advanced transparency practices anchored in law and strategic planning; has fostered stakeholder trust and supported autonomy and policy effectiveness. - Notable institutional data points: - Banking sector concentration: top six banks make up almost 88 percent of the market. - FX interventions: 5 interventions in the past 20 years. - Monetary policy stance example: policy rate held at minimum of 0.5 percent for a policy horizon of two years. - Inflation framework: target of 3 percent with tolerance range of plus or minus one percentage point (and references to a 2 percent to 4 percentage range). ### Pillar I — Governance: main findings and recommendations - Legal structure and mandate: - Legal nature, mandate, and autonomy disclosed via Constitution and CBC Law; information is accessible but scattered. - Financial stability legal foundation and macroprudential powers exist but could be emphasized more clearly on the website. - Recommendation: assemble legal framework information in one webpage and explain rationale, including role of the Minister of Finance on the Board, legal foundation of financial stability mandate and macroprudential policy, and rules on monetary financing. - Organizational disclosure and decision‑making: - Organizational chart, Board functioning, biographies of Board and senior management disclosed; Norma de Organización y Funciones (2017) should be updated at least annually. - Recommendation: publish ACC charter/by‑laws and biographies of outside ACC members. - Risk management and accountability: - 2019 Annual Report lists economic, social, and environmental risks; Corporate Risk Area and Office of the General Auditor roles described in financial statements (Note 5). - CBC established a Risk Committee in 2019 and has a Comprehensive Risk Management Policy and Methodology not published. - Recommendations: - Publish a risk statement defining acceptable risk taking and map key risks to the CBC mandate. - Disclose process for continuous identification, evaluation, and mitigation of risks. - Publish the Comprehensive Risk Management Policy/Methodology (subject to confidentiality limits) and the Risk Committee charter. - Internal controls, audit, and ethics: - Independently audited financial statements prepared in accordance with IFRS; external audit rotation policy exists but is unpublished. - Code of Conduct fully disclosed; Ethics Committee composition described but functioning and membership status (invitee vs standing member) ambiguous. - Recommendations: - Publish ACC Charter and ACC activity report; disclose external audit rotation policy; clarify applicability of domestic anti‑corruption legislation to all CBC members and publish details on internal controls implementing the Code of Conduct. - Publish Ethics Committee charter and quantitative anonymized data (e.g., number of conflicts of interest raised and sanctions, if any). ### Pillars II–IV — Policies, Operations, Outcomes: key findings and suggested improvements - Monetary policy transparency: - CBC publishes quarterly Monetary Policy Report (MPR), press releases on MPM decisions, meeting records, minutes (published with a lag of 10 business days / 11 days in practice), and votes of each Board member. - Technical models and codes disclosed (e.g., “Use of Macroeconomic Models in the Central Bank of Chile 2020”); Independent Evaluation Panel report (September 2019) with recommendations; CBC initiated implementation of Recommendations 18–22 and 24 expected during 2021. - Recommendations: - Disclose methods, techniques, and data underlying dedicated monetary policy evaluations; provide simplified materials for general public. - Monetary operations and instruments: - Operational framework disclosed in Compendium of Monetary and Financial Regulation (CMFR) and “Chile’s Monetary Policy: Within an Inflation‑Targeting Framework.” - Recommendation: update documentation to include recently issued unconventional monetary policy instruments; publish ex post evaluations of monetary policy actions. - FX administration and reserve management: - FX legal framework and compendium disclosed; detailed FX statistics and daily bidding operations published. - Past intervention example: November 2019 intervention (approved Nov 28, 2019; ran Dec 2, 2019–May 29, 2020) up to 20 billion USD; announcement rationale not always fully clear to market participants. - Recommendations: - Examine how to ex‑ante disclose intended objectives of FX interventions and publish ex‑post evaluations; consider publishing investment committee discussions with a lag where feasible. - Financial stability and macroprudential policy: - CBC discloses macroprudential framework, instruments, strategy, early warning indicators, stress test results, and publishes semiannual Financial Stability Report (FSR). - Coordination is shared with other authorities (MoF, FMC/CMF, Superintendent of Pensions) via the Financial Stability Board (FSB); operational coordination with FMC staff. - Recommendations: - Publish ex post evaluations of macroprudential policy actions and clarify CBC roles and coordination arrangements with other authorities on the website. - Emergency Liquidity Assistance (ELA) and exceptional measures: - CBC discloses scope and rules for market‑wide liquidity support and described COVID‑19 unconventional measures (e.g., FCIC); bilateral ELA confidentiality constrains disclosure. - Recommendations: - Consider disclosing aggregate information on bilateral ELA (without naming recipients) and disclose preconditions, eligibility, conditionality, collateral framework, and risk control measures for ELA where legally permissible. - Financial integrity (AML/CFT): - CBC is not engaged in AML/CFT supervision and does not disclose internal AML/CFT controls addressing ML/TF risks arising from CBC operations. - Recommendation: disclose description of internal control framework relating to activities/services that may give rise to ML/TF risk and resources allocated to such controls. ### Pillar V — Official relations and public engagement - Official relations: - CBC appears legally constrained from disclosing cooperation agreements, MoUs, and arrangements with government bodies, domestic public financial agencies, and foreign entities; many interactions classified as “reserved” under section 66 of CBC Law. - FSB minutes are published on the Ministry of Finance website; CBC does not routinely publish texts of MOUs or coordination agreements even when counterparts do. - Recommendations: - Significantly strengthen transparency of official relations by creating an “Official Relations” section and, within legal constraints, disclose legal/factual status of relationships, joint events, regular information flows, and persons in charge. - Where counterpart permits, disclose exchanges of information and coordination with international agents and publish a list of organizations of which CBC is a member. - Public engagement and communications: - Institutional Affairs Division leads communication strategy; website (Spanish/English) is primary channel; publication calendar provided (e.g., 4 MPRs in March, June, September, December; 2 FSRs in May and November; 8 MPMs in specific months). - Minutes published with a lag; MPM Communiqué issued at 6:00 PM same day including Board votes; statutory response time for access to information 20 business days but CBC typically responds within 10 business days; voluntary practice to publish all Transparency Law responses including denials. - Recommendations: - Provide simplified versions of key disclosures, deepen educational outreach, broaden communication tools (including social media), and improve website search functionality. ### Key numeric and timetable facts preserved from the review - Mission dates: March 3–18, 2021. - Banking concentration: top six banks make up almost 88 percent of the market. - FX interventions: 5 interventions in the past 20 years. - Policy rate example: minimum of 0.5 percent held for a policy horizon of two years. - Inflation target: 3 percent (references to tolerance ranges: plus or minus one percentage point; and 2 percent to 4 percentage range). - Publication cadences: 4 MPRs (March, June, September, December); 2 FSRs (May and November); 8 monetary policy meetings (January, March, May, June, July, September, October, December). - Minutes publication lag: 10 business days / 11 days referenced. - External examples/dates: November 28, 2019 Board approval of FX intervention running Dec 2, 2019–May 29, 2020; example intervention amount up to 20 billion USD. ### Ten key recommendations (as summarized in the review) 1. Enhance disclosure of legal structure information and rationale (including Minister of Finance role, financial stability mandate, macroprudential policy foundation, and rules on monetary financing). 2. Disclose comprehensive information on applicability of domestic anti‑corruption legislation to all CBC members (decision‑makers, staff, agents). 3. Disclose a description of the CBC internal control framework relating to activities/services that may give rise to AML/CFT risk. 4. Strengthen risk management transparency by publishing a risk statement, high‑level overview of key risks mapped to the mandate, and disclosure of continuous risk identification/evaluation/mitigation process. 5. Publish charters/by‑laws of the Audit and Compliance Committee, Risk Committee, and Ethics Committee to inform on roles, responsibilities, reporting lines, and composition. 6. Disclose methods, techniques, and data underlying dedicated monetary policy evaluations. 7. Publish ex post evaluations of macroprudential policy actions examining whether tools had intended effects. 8. Consider disclosing whether CBC has provided bilateral liquidity support to specific financial entities at the aggregate level without naming recipients. 9. Examine ex‑ante disclosure of intended objective(s) of FX interventions and ex‑post evaluations of FX management policy; accompany interventions with press release and Q&A and update internal protocols to include motivations, objectives, and desired outcomes. 10. Strengthen transparency regarding official relations with the Ministry of Finance, domestic financial agencies, and foreign agencies (create “Official Relations” webpage and disclose permitted information). *IMF staff compilation from the Central Bank Transparency Code review — Central Bank of Chile (mission: March 3–18, 2021).* ### EXECUTIVE SUMMARY ___________________________________________________________________________ 4 ### EXECUTIVE SUMMARY ### SCOPE AND OBJECTIVE - The mission conducted a Central Bank Transparency Code (CBT) review for the Central Bank of Chile (CBC) at the CBC’s request. - This review is the first to be conducted under the CBT pilot program. - Scope: - Covers the CBT’s five-pillar framework, excluding principles related to functions not performed by the CBC. - Excludes transparency-related issues pertaining to areas for which separate international standards exist (e.g., financial sector supervision and regulation, oversight of financial market infrastructures, bank resolution). These principles are denoted as “Not-Applicable” in the review. - Purpose: - To allow the CBC to evaluate its transparency practices by highlighting strengths and areas for improvement. - The review focuses on the CBC’s transparency practices regarding its governance and actions; it does not assess or pass judgement on the quality or adequacy of CBC’s governance and actions. - Maps CBC transparency choices against a range of best practices in the CBT covering transparency in (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. - Intended to strengthen CBC dialogue with stakeholders and contribute to improved accountability and policy effectiveness. ### APPROACH AND METHODOLOGY - Review approach: - Team desk review based on information disclosed by the CBC on its website and other media, in English or in Spanish. - CBC self-review provided to the mission. - In-depth discussions with CBC staff (members of the Board, management, and staff) and with key CBC stakeholders. Meetings with stakeholders were planned in coordination with the CBC; CBC staff were not present during most stakeholder meetings. - The review was conducted principle-by-principle, considering important dimensions of transparency: - (a) timeliness, - (b) periodicity, and - (c) quality of disclosure (accessibility and ease of understanding, especially by the general public). - The review recognizes the role of the legal framework in shaping CBC transparency choices and notes that the Transparency Law (Law no. 20285, Transparency of the Public Service and Access to Information on State Administration On Access to Public Information, 2008) and other legal restrictions or exemptions underpin the CBC confidentiality policy. The policy should clearly disclose the relevant laws and regulations and where they may significantly impact CBC transparency practices. - Note: In case of Spanish documents or webpages, the mission had these translated and did not make a distinction between disclosure in English or Spanish for the purposes of reviewing the CBC’s transparency practices. ### BACKGROUND - Economic context: - Chilean economy recovered from a prolonged slowdown following the decline of copper prices in 2011 but took a hit during the COVID-19 pandemic crisis. - Robust growth in recent years was largely due to a rebound in both mining and non-mining, as well as robust confidence in the Chilean economy. - The economy declined sharply by mid-2020 like most economies in the world, but economic activity started to recover since then in the wake of ample policy stimulus, although indicators for some sectors and the labor market remain considerably worse than pre-pandemic levels. - Box 1. Central Bank of Chile and Transparency over COVID-19 Measures: - CBC extraordinary policy measures in response to COVID-19 included: - A program for purchasing commercial bank and central bank bonds. - Credit and liquidity lines designed to strengthen bank lending. - Special measures to support market stability, including a facility that temporarily took a significant amount of bank bonds onto the CBC’s balance sheet during the large pension fund withdrawals allowed in 2020. - These measures were coordinated with the financial supervisor and the Ministry of Finance (MOF). - CBC transparency actions during COVID-19: - Proactive and timely engagement with the general public, the government, and intergovernmental counterparts through a platform to articulate exceptional financial measures. - Rapid response and effective communication strategy included reaching out to various regions in Chile via presentations of the Governor and other Board members, press releases, and social media messaging, strengthening public trust in the CBC in times of crisis. - Concrete examples: - A special website section with recent market operations conducted in the context of COVID-19. - A study carried out in March 2021 reviewing the monetary and financial policy response to COVID-19, detailing specific policy measures implemented in Chile and showing the pandemic’s impact on the balance sheet of the CBC and on other macroprudential metrics. ### MAIN FINDINGS - Overall assessment: - The CBC has implemented broadly advanced transparency practices, reflecting a strong public commitment to transparency anchored in law and designated by the CBC as a strategic objective to fulfill its mandate. - This policy has earned the CBC broad trust from stakeholders and has helped safeguard its autonomy and ensure policy effectiveness. - Monetary policy transparency: - The CBC has a comprehensive transparency framework for its core monetary policy mandate. - Adoption of inflation targeting and a free-floating exchange rate regime in the late 1990s solidified CBC transparency progress. - Transparency framework for monetary policy is well established, covering policy decisions, supporting analysis, operations, and reporting. - Transparency quality is high in terms of timeliness, periodicity, and disclosure. - Financial stability and macroprudential transparency: - CBC is updating its transparency framework for financial stability in accordance with macroprudential tools acquired by law. - CBC has a legal mandate for financial stability focused on normal functioning of internal and external payments and as provider of emergency liquidity. - In recent years the CBC acquired new tools by law, assuming responsibilities on macroprudential policy and enhancing collaboration with other agencies that share financial stability responsibilities. - CBC has made determined efforts to strengthen transparency of its (shared) involvement in financial stability issues, although more transparency is warranted on: - Its mandate in this area. - Delineating its role vis-à-vis other institutions involved. - Governance and risk management transparency: - CBC provides detailed information on organizational structure, the Board and senior management, decision-making processes, and access to information policy. - CBC is enhancing transparency over its risk management framework and its operational risk management function, as well as disclosure of its oversight arrangements; more emphasis could be placed on risk management going forward. - Official relations transparency: - CBC appears restricted, in part by law, from disclosing cooperation arrangements, agreements, and other relations with government bodies, domestic public financial agencies and foreign entities, even when CBC counterparts sometimes release such information. - Improving disclosure of official relations would enhance credibility of the CBC transparency framework. - Public engagement: - There appears to be broad appetite from the general public for deeper engagement with the CBC. - Considerations to maintain public trust and support for the CBC mandate and institutional status: - Provide simplified versions of key disclosures on the CBC website and other platforms. - Deepen ongoing educational and outreach programs. - Broaden the set of communication tools, including social media. ### CENTRAL BANK TRANSPARENCY OVERVIEW (STRUCTURE) - The review maps CBC practices across the CBT five pillars and sub-principles (Governance; Policies; Operations; Outcome; Official Relations), noting sub-principles related to functions not performed by the CBC as “Not Applicable.” ### KEY RECOMMENDATIONS 1. Enhance the disclosure of information regarding the legal structure by assembling relevant information in the webpage and by explaining the rationale behind the legal framework, including, in particular, the role of the Minister of Finance on the CBC Board, the legal foundation of its financial stability mandate and macroprudential policy, and the rules on monetary financing. 2. Disclose more comprehensive information relating to the applicability of domestic anti-corruption legislation along with clarifying that these measures are applicable to all members of the CBC, including decision-makers, staff, and agents of the CBC. 3. Disclose a description of the CBC internal control framework relating to the activities or services that may give rise to Anti-Money Laundering/Countering the Financing of Terrorism risk. 4. Strengthen the transparency of the risk management function by publishing a risk statement that define what constitutes acceptable risk taking, providing high-level overview of key risks clearly mapped to its mandate and disclosing the process of continuous identification, evaluation, and mitigation of risks. 5. Publish the charters/by-laws of the Audit and Compliance Committee, the Risk Committee, and the Ethics Committee to transparently inform the public stakeholders about the committees’ roles, responsibilities, reporting lines, and composition. 6. Disclose the methods, techniques, and data underlying dedicated monetary policy evaluations. 7. Enhance the disclosure of macroprudential supporting analysis by publishing ex post evaluations of policy actions that examine whether tools had the intended effects. 8. Consider disclosing whether the CBC has provided bilateral liquidity support to specific financial entities. This could be done at the aggregate level without disclosing the names of the receiving entities and without violating confidentiality requirements. 9. Examine how to (ex-ante) disclose its intended objective(s) of FX interventions more clearly, and ex post disclose evaluations of its FX management policy. 10. Significantly strengthen the transparency framework with respect to the CBC’s official relations with the Ministry of Finance and other government bodies, domestic financial agencies, and foreign agencies. *Source: Central Bank Transparency Code review — Central Bank of Chile (EXECUTIVE SUMMARY).* ### 7. Chile’s financial sector is one of the deepest in the region and is highly integrated in ### 7. Chile’s financial sector is one of the deepest in the region and is highly integrated in ### Financial sector overview - The banking sector is highly concentrated, with the top six banks making up almost 88 percent of the market. - Since the 2011 Financial Sector Assessment Program (FSAP), commercial bank funding has become increasingly reliant on bond issuance that is intermediated by the mutual fund and pension sectors. - The banking system appears resilient during the COVID-19 crisis, despite lower profitability resulting, in part, from increased provisioning. - A new FSAP mission had started its review at the time of preparation of this report. ### Central Bank of Chile (CBC): mandate, functions, and history - The CBC is an autonomous public institution with a mandate focusing on ensuring price and financial stability. - Functions and powers include: currency issuance, regulation of the stock of money in circulation and credit, fiscal agent, international reserve management, foreign exchange transactions, and other functions. - The CBC adopted an inflation-targeting regime in 1999. - In financial stability, CBC powers include safeguarding the stability of the payments system, providing Emergency Liquidity Assistance (ELA), risk identification and monitoring, and design and implementation of prudential and exchange regulations. - The CBC has a long-standing public commitment to transparency anchored in law and included in its strategic plan. - The Political Constitution of Chile and the Organic Constitutional Law of the Central Bank of Chile (Law No.18840) determine the specific transparency framework that governs the CBC. ### Institutional coordination and stakeholders - The CBC’s main public stakeholders are combined in the Financial Stability Board (FSB), created in 2011 “to ensure the integrity and soundness of the financial system, providing the necessary coordination and information exchange mechanisms to carry out a preventive management of systemic risks and for the resolution of critical functions that involve the exercise of the functions and powers of the Superintendencies of the Economic Area.” - The FSB consists of the Minister of Finance (president), the President of the Financial Markets Commission (FMC), and the Superintendent of Pensions. - The CBC is not a formal FSB member but provides permanent advice; the CBC Governor (or designated replacement) attends FSB sessions. - Minutes of FSB meetings are published on the Ministry of Finance’s website. ### Box 2 — Evolution of CBC transparency practices (summary) - Foundations of the new transparency system were laid in the CBC’s Constitutional Organic Law of 1989, which granted CBC autonomous status. - The late 1990s adoption of inflation targeting and a free float exchange rate required enhanced transparency: by end-1999 the CBC Board had press releases, a disclosed schedule of meetings, prior disclosure of economic analysis, and minutes disclosed after a period of 11 days including publication of the debate and voting record. - A mid-2000s leak of confidential monetary policy information led to a policy for handling sensitive information and risk management balancing confidentiality and transparency. - In 2007 the Audit and Compliance Committee (ACC) was created to enhance governance, accountability, and transparency. - A general Transparency Law (Law no. 20285, Transparency of the Public Service and Access to Information on State Administration on Access to Public Information, 2008) enacted procedures for access to information; it created a partial “non-binding status” for the CBC due to its institutional nature and sensitive tasks. The CBC subsequently created its own transparency system in accordance with the principles of the Transparency Law. - The CBC Law was modified by explicitly establishing a framework for access to public information and the creation of the active transparency policy of the CBC, balanced by explicit provisions on confidential information. - The CBC positioned transparency as a key principle in its “Strategic Planning for 2018–2022.” ### Main findings — Pillar I. Transparency in Governance - Legal structure disclosure: - The legal nature, mandate, and autonomy of the CBC are well disclosed through the Constitution and the CBC Law; these laws are accessible from the CBC website and in the CBC’s Annual Report. - Disclosure could be enhanced by assembling relevant information together and explaining rationale behind legal framework, particularly: (i) role of the Minister of Finance at Board meetings; (ii) legal foundation of financial stability mandate and macroprudential policy; (iii) rules on monetary financing. - Organizational disclosure: - CBC provides a broad overview of organizational structure and Board functioning; biographies of Board members and senior and middle management are disclosed. - Department roles and responsibilities are disclosed on the website but could be updated at least annually. - Risk management disclosures: - CBC is strengthening its risk management framework and operational risk management function; these developments and principal risks should be transparently disclosed, including an explicit risk statement, a high-level overview of key risks mapped to its mandate, and the process for identification, evaluation, and mitigation of risks. - CBC policies on sensitive materials may preclude publication of certain information. - Oversight arrangements: - The legal framework does not refer to an independent oversight body; some oversight tasks are entrusted to the Board. - The ACC oversees audit, financial reporting, and internal control, but detailed responsibilities are not disclosed; consider publishing the ACC charter, roles, responsibilities, reporting lines, composition, and activities. - Human Capital Management (HCM): - CBC aims to be an employer of excellence and included HCM as one of five strategic priorities for 2018–2022. - CBC discloses staff development, leadership, diversity and inclusion, and programs for attracting/promoting/retaining talent; disclosures could be improved with more information on oversight practices and quantitative measures linking to HCM strategy. - Anti-corruption and Code of Conduct: - CBC discloses certain anti-corruption measures, whistle-blowing mechanisms, and rules for accessing confidential information. - Code of Conduct disclosures cover conflicts of interest, professional conduct, purchasing, recruitment objectivity, external activities, financial and personal investments, outside income, corruption, and acceptance of gifts. - Enhancements suggested: clarify whether “cooling off” periods apply post-public employment; include aggregated numbers of conflicts of interest raised; provide details on internal grievances, dismissals, or sanctions; disclose more on Ethics Committee activities and functioning. ### Main findings — Pillars II, III, and IV. Transparency in Policies, Operations, and Outcome Monetary Policy - CBC provides high level of transparency on monetary policy framework: - Publishes quarterly Monetary Policy Report, press releases on monetary policy decisions, meeting records of the monetary policy committee, and dedicated speeches by senior management. - Regular venues such as press conferences are provided to explain decisions and rationale. - Technical details disclosed include scenario analysis, relevant models, and assumptions. - Monetary operations: - Operational framework disclosed with clear operational target, objectives, and tools, outlined in documents such as the Compendium of Monetary and Financial Regulation (CMFR) and “Chile’s Monetary Policy: Within an Inflation-Targeting Framework.” - Categories of monetary policy counterparties and access criteria are clearly defined and disclosed. - Considerations: update documentation to include recently issued unconventional monetary policy instruments; enhance disclosure of ex post evaluations of monetary policy actions. Foreign Exchange and Reserve Management - FX administration and cross-border flows: - CBC discloses objectives, framework, and decisions; CBC website has a separate section on foreign exchange regulations and reporting on implementation. - CBC could consider disclosing timeframes for decisions on license/approval rejections and publishing individual feedback comments received in consultations (as opposed to summaries). - FX interventions: - CBC seldom conducts FX interventions; the free float does not create a de facto need for frequent interventions. - Past 20 years: only 5 interventions have taken place. - When interventions were announced after October 2019 social unrest, objectives did not seem fully clear to market participants; CBC could ex ante disclose intended objectives and ex post evaluations. - Reserves management: - Transparency of FX reserve management reasonably well defined: clear information, charts, portfolio breakdown, objectives, and framework. - Areas for improvement: publish investment committee discussions (with lag), disclose rules/procedures related to markets/counterparties/custodians/service providers and exposure (aggregated/timed), and publish evaluations of investment impacts and risk assessments. Financial Stability and Macroprudential Policy - Macroprudential framework: - CBC discloses objectives, instruments, strategy, conceptual framework, and publishes a semiannual Financial Stability Report (FSR). - FSR discusses analysis and assessment; CBC discloses early warning indicators and stress test results and explains linkage between tools and objectives. - Comprehensive risk assessments: - CBC periodically and timely discloses comprehensive assessments of financial vulnerabilities, methods, and underlying data. - Discloses design and scope of macroprudential tools and types of institutions/instruments subject to constraints. - CBC consults relevant authorities and the general public before major changes. - Suggested enhancements: - Provide more information on cooperation and coordination of macroprudential issues with other governmental agencies, including the CMF and the FSB. - Publish ex post evaluations of macroprudential policy actions to examine whether tools had intended effects. Emergency Liquidity Assistance (ELA) - CBC discloses scope, objectives, rules, and procedures of market-wide liquidity support and explains deviations from standard monetary operations including amounts, maturity, and financial parameters. - CBC may disclose aggregate information on ELA provided bilaterally to financial institutions facing temporary liquidity problems without violating confidentiality. - CBC may disclose general principles, terms and conditions, procedures, collateral framework, and risk control measures for liquidity support to individual institutions. Financial Integrity (AML/CFT) - CBC is not engaged in AML/CFT supervision. - CBC does not disclose details related to internal AML/CFT controls implemented to address ML/TF risks arising from CBC operations; disclosure of such ML/TF risks and controls would enhance transparency. Communications and Confidentiality - CBC implements a comprehensive communications policy and strategic program to engage stakeholders and the general public. - CBC website (Spanish and English) is the main communication channel; quality and quantity of information are satisfactory but search functionality could be improved. - CBC should expand educational outreach, simplify technical language for general public understanding, and actively promote messages via mass and social media to engage more broadly. *CHILE INTERNATIONAL MONETARY FUND* ### 29. The CBC Act provides the CBC with a solid confidentiality mechanism. The ### The CBC Act provides the CBC with a solid confidentiality mechanism. The ### CBC confidentiality framework - The confidentiality policy is established by the CBC Act. - The CBC Act specifies the CBC functions that are considered as “reserved.” - The CBC Act establishes the circumstances under which the CBC is allowed by law to share such information and enlist the official counterparts to whom the CBC is compelled to disclose reserved information. - This system gives legal certainty and solidifies the transparency policy of the CBC. - There is a case for waiving the confidentiality in reference to information that is already in the public domain, for example, decrees, press releases and any other information compiled by CBC counterparts that has been made public or where there is an interest to make it public. ### Pillar V. Transparency in Official Relations — summary of issues - There is significant room for improvement in the CBC’s disclosure practices of its official relations with the government and domestic public financial agencies. - Important information regarding the CBC’s interaction with the MOF (including services provided to the MOF) and other domestic agencies, and the role and actions of the CBC in shared responsibilities, are classified as “reserve” and not disclosed by the CBC, even when parts or all of this information may have been released by the CBC counterparts. - The CBC does not disclose the texts of cooperation agreements, Memorandums of Understanding (MoUs), or other arrangements between the CBC and foreign agencies as they all fall under legal “reserve.” - A general policy of disclosure of the interaction with international organizations, other central banks, or any other international agent that allows it or even wants to publish its interaction with the CBC, as well as a list of organizations that the CBC is a member of, could be considered. - The disclosure of such information would explain to the public the importance and benefits of these relations. ### Detailed review — scope and limitations - This review is based on the current state of CBC’s transparency practices. - The mission took place during March 3–18, 2021, and initiatives implemented after the review date have not been considered. - In accordance with the CBT, this review does not assign ratings to the CBC’s adherence to the CBT principles. The review maps the CBC’s transparency practices across a range of best practices. - The CBC transparency practices were reviewed in the context of: - the CBC’s legal mandate and policy context, - the sophistication and complexity of the financial system of Chile, - prevailing general legal framework (including, but not limited to, the existence of rules on freedom of information, confidentiality, and active transparency). ### Review methods and stakeholder engagement - The review team examined the CBC’s transparency practices and tools, relevant laws and policies, and held extensive meetings with the CBC Board, management and staff, and key stakeholders. - Meetings with stakeholders were intended to ascertain the adequacy of and identify gaps in CBC transparency practices from their perspective. - The team met with members of Congress, staff from the MoF, CMF, and local and foreign financial institutions, as well as representatives from the banking association, and various other stakeholders (such as academics, and consumer organizations). - The CBC provided a comprehensive self-review of the CBT, detailed responses to additional questionnaires, and access to relevant public documents. ### Assessment approach and purpose - Reaching conclusions based on the CBT review of the CBC required judgments by the review team. - Central banks, the environment in which they operate, and domestic circumstances differ from one country to another. - By adhering to a common, agreed methodology, this review, which is voluntary, should provide the CBC with a benchmark for its transparency practices, whilst taking domestic considerations into account. *IMF staff compilation from the CBC transparency review (mission: March 3–18, 2021).* ### 36. The team appreciated the very high quality of cooperation received from the CBC. The ### 1chlea2021004 - 36. Central Bank Transparency Code—Detailed Review: Central Bank of Chile ### Cooperation with Mission - The team appreciated the very high quality of cooperation received from the CBC. - The team extends its warm thanks to the staff of the CBC, who provided excellent cooperation, including provision of self-review, documentation, technical support, as well as facilitating the mission meetings schedule. ### Pillar I — Central Bank Governance: Overview - Document provides a detailed assessment of disclosure against Principles 1.1–1.5 under the Central Bank Transparency Code. - Primary source materials referenced include the CBC Law (Constitution and Constitutional Organic Law), the CBC website (Regulation; Corporate Governance; The Bank and its internal governance; Our People), the 2019 Annual Report, and the 2019 financial statements (Note 5). ### Principle 1.1. Legal Structure — Legal Framework, Nature, and Protection Findings - The CBC discloses it is governed by the Constitution and the Constitutional Organic Law (the CBC Law). - The CBC Law provides objectives, functions, and powers of the CBC, and clarifies that the CBC Law prevails over other laws if conflicting. - The CBC Law clarifies transitional arrangements which are limited in time. - The CBC has been actively communicating with the public on its legal frameworks through the recent Constitutional reform discussion. - The “Regulation” section of the CBC webpage has links to regulations adopted with respect to financial institutions. - Procedures for receiving public comments on regulatory amendments are published, though not always easy to find. Review (expanded) - Legal framework: well disclosed; technical issues not explained on the webpage but reasonably accessible. - Legal nature: clarified in the CBC Law and disclosed in the Annual Report and website; information is placed in different materials that may not be easily accessed. - Legal protection: mainly clarified in the CBC Law and relatively easy to access for interested parties; not explicitly explained on the website or in other publications. Comments / Recommendations - Disclosure could be enhanced by assembling information on legal framework, legal nature, and legal protection under one webpage section and explaining the rationale behind the legal framework to benefit the general public. ### Principle 1.2. Mandate — Objectives, Functions, Powers Objectives — Findings - Objectives are clarified in the CBC Law and disclosed in the website and Annual Report. - Legal foundation of the price stability objective is clear and well communicated. - Legal foundation of the financial stability objective is based on “the normal functioning of external and internal payment systems” and may not be clear from the CBC Law itself; this is not clearly emphasized on the webpage. - CBC states its objectives do not conflict; mechanism to determine a prevailing objective is not disclosed. - Degree of autonomy does not vary across objectives according to the CBC; this is not disclosed. - CBC clearly defines a quantified price stability objective with an inflation target. Functions — Findings - CBC webpage and Annual Report disclose a list of activities and explain consistency with objectives. - Legal foundation of functions is depicted in the CBC Law; press releases issued when adopting new regulation or policy measures. Powers — Findings - Powers (public and private law powers) clarified in the CBC Law. - Powers related to monetary policy are clearly and in detail disclosed on the website. - Disclosure on powers related to financial policy (macro-prudential tools and coordination with the government) is not sufficiently emphasized on the website and in the Annual Report. - Prohibited activities (e.g., prohibition of providing credit to the government) exist in the Constitution but are not sufficiently emphasized on the website. Review (expanded) - Objectives: price stability legal foundation clear; financial stability foundation could be emphasized more. - Functions: list of functions clarified and disclosed. - Powers: powers and prohibited activities clarified in the CBC Law; disclosure on financial policy powers and prohibition on credit to government not sufficiently emphasized. Comments / Recommendations - Enhance disclosure clarifying the CBC’s mandate in financial stability, especially powers regarding macro-prudential policy. - Emphasize prohibition on providing credit to the government and its rationale on the website. - Assemble mandate-related information under one webpage section along with legal structure information. ### Principle 1.3. Autonomy — Institutional, Functional, Personal, Financial Principle 1.3.1 Institutional/Operational Autonomy — Findings - Institutional autonomy clarified in the Constitution and CBC Law. - Annual Report discloses the role of the Minister of Finance at Board meetings; role of the Minister is not clearly disclosed on the webpage in Corporate Governance or Monetary Policy sections. - Multiple publications on autonomy exist but are scattered across the website. Review / Comments - Assemble legal framework information, including institutional autonomy and the role of the Minister of Finance, in one website section and explain the rationale; this will be beneficial to the general public. Principle 1.3.2 Functional Autonomy — Findings - Annual Report discloses the role of the Finance Minister at Board meetings; webpage does not clearly disclose this role in corporate governance or monetary policy context. - CBC discloses how its monetary policy goal is determined and whether it is autonomous in exercising such goal. - Institutional arrangement with the government in financial policy is not sufficiently disclosed. - Publications on autonomy are placed in different website sections. Review / Comments - Improve disclosure on the role of the Minister of Finance and institutional arrangements with the government regarding financial policy by assembling functional autonomy information in one webpage section and explaining the rationale. Principle 1.3.3 Personal Autonomy — Findings - CBC Law clarifies Board members’ term of office, appointment procedures, dismissal procedures, eligibility and incompatibility requirements, grounds for dismissal, remuneration rules and arrangements, and liability for damages. - Key elements disclosed in the Corporate Governance section of the website; information is reasonably easy to access. - Rationale for personal autonomy elements is not explicitly disclosed. Review / Comments - Assemble personal autonomy information in one website section and communicate the rationale behind the legal framework to benefit the general public. Principle 1.3.4 Financial Autonomy — Findings - CBC Law and the Annual Report clarify general arrangements regarding capital, budget, reserves, provisions, profit distribution, monetary financing, and applicable accounting standards, including decision-making procedures. - Specific information on financial autonomy can be implied from the CBC Law but is not explicitly disclosed. - Rules on monetary financing are not clearly communicated in the monetary policy section of the website. Review / Comments - Assemble financial autonomy information (including rules on monetary financing) in one website section and clearly communicate the rationale behind the legal framework for public benefit. ### Principle 1.4 Decision-Making Arrangement — Organizational Structure, Bodies, Oversight Organizational structure — Findings - 2019 Annual Report subchapters 3.1 “Our Board” and 6.4 “Organizational Chart” describe Board functioning and organizational structure. - CBC Regulation website provides information on roles and responsibilities of each department (Norma de Organización y Funciones), prepared in 2017 and requiring updating. Decision-making bodies — Findings - CBC Law establishes two decision-making bodies: - The Governor: responsible for conducting relations of the Bank with public authorities and with domestic, foreign, or international banking and financial institutions (Section 22). - The Board: composed of the Governor, the Deputy-Governor and three directors (Sections 7, 8, and 9). - CBC website “The Bank and its internal governance” describes the role of the Board and links to relevant documents: Board's Operating Regulations (procedures for ordinary, extraordinary and special meetings, including monetary policy meetings), Board's salary, Constitutional Organic Law; Charter I and II. Senior management — Findings - Section 22 of the CBC Law grants the Board authority to appoint the General Manager, General Counsel, and General Auditor and to specify responsibilities (Sections 24–26). - Website states Senior Management comprises the General Manager, General Counsel, General Auditor, seven division directors overseeing 22 area managers. Short descriptions provided for General Counsel and General Auditor roles. - 2019 Annual Report (3.1.1—Senior Management) states: - The General Manager is in charge of immediate oversight and management of the Bank, in accordance with authority and instructions given by the Board. - The General Counsel oversees the legality of agreements, resolutions, and contracts, controlling legal risk. - The General Auditor is responsible for internal audit and inspection of accounts, operations, and management standards. Advisory committees — Findings - Website refers to the Audit and Compliance Committee (ACC) and the Information Technology Committee with high-level information on roles and membership. - 2019 Annual Report (3.1—Our Board) refers to four committees that meet weekly: - The Economic, Financial, and Statistics Committee (objective: optimize distribution of work between Board and monetary policy, financial policy, and statistics areas). - The Audit and Compliance Committee (ACC) (objective: report on effectiveness of internal control systems; analyze equity and reputational effects; evaluate reliability, integrity, and timely delivery of financial statement information; review Annual Audit Plan and make proposals on independent auditors). - The Risk Committee (objective: coordinate risk monitoring and communication activities, provide feedback to divisions in charge of risk management). - The Information Technology Committee (objective: advise the Board and General Manager on IT corporate governance issues). - CBC discloses detailed biographies of Board members, senior management, division directors, and area managers on “Our People”; biographies of ACC members are not disclosed. Functioning of the Board — Findings - Board holds ordinary meetings at least once a week and extraordinary meetings when summoned by the Governor or by written request of two or more Board Members. - Board resolutions require a quorum of three Members and majority vote of those present; presiding Board Member casts deciding vote in case of tie. - Board empowered to meet and vote anywhere within Chile; internal mechanisms ensure quorum compliance if members cannot be physically present. Financial statements disclosures — Findings - 2019 Financial statements Note 5 include information on role of ACC, the risk management function, and the General Auditor: - ACC acts as external advisor to the Board, reports on efficacy of internal control systems and procedures used in financial asset and liability portfolio management, and evaluates reliability, integrity, and timeliness of financial statement information. - Corporate Risk Area reports to the General Manager, monitors medium- and long-term risks of the investment portfolio and verifies compliance with investment policy limits reported to the Financial Markets Division and the General Manager. - Office of the General Auditor reports directly to the Board and assesses efficacy and efficiency of internal control, risk management, and governance of financial asset and liability portfolio management; reviews regulatory compliance, internal control environment, IT security, and governance/risk/information issues. Review (expanded) - CBC clearly discloses organizational structure and rules governing the Board, composition of decision-making bodies, and allocation of responsibilities. - Norma de Organización y Funciones (2017) should be updated annually. - Need for clearer disclosure of CBC oversight arrangements: legal framework entrusts oversight tasks (e.g., approval of accounting framework and financial statements) to the Board; ACC appears established outside the legal framework. - 2019 Annual Report lists eight ACC members erroneously; actual committee is composed of four members. - Biographies of ACC members are not disclosed. Comments / Recommendations - Update department roles and responsibilities (Norma de Organización y Funciones) annually. - Enhance transparency of oversight arrangements by publishing the ACC charter/by-law. - Disclose biographies of outside ACC members to inform public about committee expertise and independence. ### Principle 1.5 Risk Management — Principal Risks and Framework Principle 1.5.1 Risk Exposure — Findings - 2019 Annual Report (3.2—Risk Management) lists key institutional risks categorized as: (i) economic; (ii) social; and (iii) environmental. - Implementation completed on a governance, risk, and compliance (GRC) tool integrating risk management, business continuity, and incident management. - A survey assessed strategic risks; these are subject to continuous analysis and monitoring. - 2019 Annual Report (4.3—International Reserves and Sovereign Wealth Funds) discloses investment policy objectives: - To hold reserves in highly liquid instruments callable in the briefest period without significant transaction costs; - To invest in instruments with limited financial risks to limit capital losses; - To minimize volatility of the Bank’s equity due to exchange rate changes vis-à-vis the peso to reduce negative balance sheet effects; - To reduce the cost of holding reserves at the margin by including a portfolio oriented toward higher absolute returns in the long run. - 2019 Annual Report (6.1 Appendix 1: International Reserves) includes benchmark structure of cash and investment portfolios, portfolio performance, composition of international reserves, eligible banks and permissible limits, securities lending program. - 2019 Annual Report and 2019 financial statements (Note 5—Financial instrument risks and risk management) disclose developments in financial risks related mostly to international reserves and include operational risk in managing financial instruments. Review (core) - 2019 Annual Report provides an overview of institutional risks in economic, social, and environmental areas but these risks are barely discussed elsewhere in the report and are not mapped to the CBC’s mandate. - Bank clearly discloses level of and developments in financial risk exposure for international reserves and open market operations; information about exposure to other risks is absent. - Investment policy objectives are transparently disclosed. - 2019 Annual Report lacks a risk statement outlining stance on operational and other risks from policy operations and other activities; such a statement should specify a constraint or desired outcome. - Quantified demands on CBC’s financial resources/buffers associated with risk exposure are not disclosed. Comments / Recommendations - Strengthen disclosures underpinning risk management function as CBC develops risk management capabilities: - Include a high-level overview of key risks clearly mapped to the CBC mandate and the role of risk management in pursuit of objectives. - Disclose a risk statement outlining stance on operational and other risks. - Consider disclosing quantified demands on financial resources/buffers associated with risk exposure, including a brief description of the methodology used for quantification. Principle 1.5.2 Risk Framework — Identification, Strategy, Governance Findings - Section 18 of the CBC Law assigns the Board responsibility to establish general policies, issue regulations of general applicability, and exercise supervision and control. - 2019 Annual Report states the CBC established the Comprehensive Risk Management Policy and Comprehensive Risk Management Methodology. - 2019 Annual Report (3.1) describes objective and composition of the Risk Committee, established in 2019 to coordinate risk monitoring and communication and provide feedback to divisions in charge of risk management. - 2019 Annual Report (3.2 Risk Management) provides overview of risk management function including: (i) corporate governance structure (Board, Senior Management, Audit and Compliance Committee, Risk Committee); (ii) list of risk management-related certifications; (iii) progress in establishing a risk appetite statement; and (iv) the risk event related to social disruption in October 2019. - 2019 financial statements (Note 5) include comprehensive disclosures on financial risks: market, credit, liquidity risks. Market risk monitoring includes measuring portfolio duration and currency allocation daily and tracking Value-at-Risk (VaR) and tracking error relative to benchmark. - Risk strategies for financial risks (e.g., collateralization of lending operations and investment limits) are described in the 2019 Annual Report (6.1). Review (core) - CBC has documented policies, methodology, committees, and financial-risk monitoring practices, with recent establishment of the Risk Committee in 2019 and progress toward a risk appetite statement. Comments / Recommendations - Continue enhancing disclosures related to the process for identifying financial and nonfinancial risks, the overall risk strategy, and the risk governance structure designed to monitor and evaluate risks effectively; ensure linkages between identified risks and the CBC’s mandate and resource requirements are communicated. *Source: Central Bank Transparency Code—Detailed Review, Central Bank of Chile (excerpts from CBC Law, CBC website, 2019 Annual Report, and 2019 financial statements as presented in the document).* ### Appendix 1: International Reserves). ### Appendix 1: International Reserves ### Risk management — disclosures and governance - Responsibilities of departments involved in risk management are disclosed on the CBC website under Regulation — “Norm of organization and functions” for all departments/units operating in the CBC. - The 2019 Annual Report provides an overview of risk governance arrangements (e.g., committees, dedicated departments) and of the risk management process. - The CBC’s legal framework indirectly allocates responsibility for risk oversight and risk management among the central bank’s decision-making bodies. - In 2019, the internal Risk Committee was established with the objective of coordinating risk monitoring and communication activities, giving feedback to the divisions in charge of the Bank’s risk management. - The 2019 Annual Report describes financial risk strategies, including collateralization of lending activities and limits in investment operations. - Limited disclosures in the 2019 Annual Report: - (i) describing the process of continuous identification, evaluation, and mitigation of risks; and - (ii) highlighting any developments in CBC’s risk framework. - The CBC’s Comprehensive Risk Management Policy and Methodology is not published. - Currently published internal regulations do not disclose responsibilities and roles of the Risk Committee. - The Bank does not disclose a high-level overview of the central bank’s policies and arrangements for times of crisis. Recommendations / Comments: - The CBC should publish the Risk Committee charter/by-law that defines the role and responsibilities of this committee. - The CBC should disclose the CBC’s Comprehensive Risk Management Policy and Methodology (or the part of this document, given that some information may be classified as confidential). In particular: - provide more information on high-level objectives and scope of risk management, and - describe methodologies for quantifying financial and non-financial risks. - Provide more comprehensive disclosures describing the process of continuous identification, evaluation, and mitigation of risks, and highlight any developments in CBC’s risk framework. - Disclose a high-level overview of policies and arrangements for times of crisis. ### Principle 1.6 — Accountability Framework (overview) - Principle 1.6: The central bank discloses its accountability framework that provides transparency and reporting mechanisms to internal decision-making bodies, political institutions, and the general public. - Description and review refer to sub-sections 1.6.1., 1.6.2., 1.6.3., & 1.6.4. ### Principle 1.6.1 — Arrangements: Independently Audited Financial Statements, Internal Audit, Audit Committee Description — Independently Audited Financial Statements: - The 2019 financial statements disclose in Note 2 that the CBC prepares its financial statements following policies approved by the Board, as stipulated in Section 75 of the CBC Law. - Per the financial statements these policies are in line with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). - Section 75 of the CBC Law: financial statements, together with the notes and the opinion, shall be published in the Official Gazette and in a newspaper of nationwide circulation before April 30 of each year. The Bank shall also publish a monthly financial statement. - Section 76 of the CBC Law: prior to January 31 of each year, the General Manager shall submit to the Board, for its decision, the financial statements for the last fiscal year, audited by external auditors appointed by the Board from among those auditors registered with the FMC. - Sections 78 of the CBC Law: financial statements and the Annual Report are published separately, and the former is included in the latter. - Section 79 of the CBC Law: the Annual Report shall be available to the public at the offices of the Bank and shall also be submitted to the Minister of Finance and to the Senate, prior to April 30 of each year. Description — Internal Audit: - Section 18(4) of the CBC Law: the Board is responsible to appoint, accept resignations and terminate the working contracts of the General Auditor of the Bank, with the majority vote of all Board Members. - Section 26 of the CBC Law: control and internal supervision of the Bank’s accounts, operations and administrative regulations are the responsibility of the General Auditor. The General Auditor shall report in writing to the Governor, with a copy to the Board, the comments and objections he may deem appropriate regarding the accounts and operations of the Bank. - Section 81 of the CBC Law: the incompatibilities set forth in Section 14 of this Law shall also be applicable to those persons acting in the capacities of General Auditor. - The CBC’s Regulation website provides information about the roles and responsibilities of the internal audit department in the document “Norm of organization and functions”(Chapter 2). Description — Audit Committee: - Section 18(2) of the CBC Law: the Board is responsible to establish the general policies of the Bank, issuing the regulations of general applicability to which it shall conform its transactions, and exercising the supervision and control of the same. - The 2019 Annual Report discloses that: - The ACC acts as an external advisor to the Board. - The ACC’s objective is to report on the effectiveness of the Bank’s internal control systems and procedures; analyze their equity and reputational effects; evaluate the reliability, integrity, and timely delivery of information on the financial statements; review the Annual Audit Plan and its execution; and make proposals on independent auditors. - The results of internal audits are reported to the CBC Governor, Members of the Board, and the ACC. Review — Expanded (key observations): - Legal framework contains provisions for an external audit of the annual financial statements and publication requirements, but lacks provisions for: - an external audit by an independent audit firm in accordance with international standards, - multi-year appointments, - audit firm rotation period, and - oversight by an audit committee. - Most of these aspects are covered by the CBC’s external auditor rotation policy; however, the policy is yet to be published. - The legal framework does not explicitly refer to the applicable accounting standards; the 2019 audited financial statements indicate IFRS as the accounting framework applied. - Internal audit function roles and duties are clearly established; reporting lines to the Governor and the ACC are established. - Section 18(4) is explicit on appointment and dismissal of the General Auditor, but no information is provided on term of appointment and eligibility criteria. Appointment of CBC staff and officials is subject to the Labor Law and internal staff regulations. - The Bank discloses that the ACC acts as an external advisor to the Board and oversees matters on final reporting, internal and external audit. Rules governing annual reporting by the ACC, including publication in the Annual Report, are not disclosed. Recommendations / Comments: - The CBC could disclose its external audit rotation policy including information on multi-year appointments of external auditors, and audit firm rotation period. - The CBC should publish the ACC Charter to disclose the committee’s roles, responsibilities, reporting lines, and composition. - It is advisable to publish the ACC report on its activities. ### Principle 1.6.2 — Tools: audited statements, internal audit, audit committee disclosures Description — Independently Audited Financial Statements: - The 2019 Annual Report includes a complete set of independently audited financial statements. - The CBC annual financial statements are prepared in accordance with IFRS. - An external audit opinion accompanies the published financial statements. - Publication of the annual financial statements is within the statutory deadline. Description — Internal Audit: - The 2019 Annual Report (subchapter 3.4) describes the rules governing the internal audit function. - The Annual Report (subchapter 3.4—Office of the General Auditor) discloses statements of conformance with international standards and basis for the function’s audit methodology, which is risk-based. - A high-level description of the function’s activities during the period is provided. - The overall opinion of periodic external quality assessments is disclosed confirming that the bank’s auditing activities “comply with international standards for the professional practice of internal auditing”. Description — Audit Committee: - The ACC’s composition is disclosed in the 2019 Annual Report on page 35, and on the Bank’s website Corporate Governance. - The CBC provides high-level description of the committee’s responsibilities—see page 35 of the 2019 Annual Report, and information in subchapters 3.2 (Risk Management) and 3.4 (Office of the General Auditor). - The 2019 Annual Report (page 34) discloses that the Bank’s committees, including the ACC meet weekly to undertake an exhaustive analysis of the issues to be covered in the Board Meetings and any resolutions scheduled to be submitted for approval. This information is not correct, as the ACC meets 6–8 times a year. - The ACC’s key activities vis-à-vis the financial statements and internal/external audits are described. A report of the ACC is not published. - There is a discrepancy in the description of the ACC’s composition: per the 2019 Annual Report (page 35) the committee is composed of eight members, but the ACC’s description available on the website Corporate Governance refers only to three external members. No information is provided on existing vacancy of one external member of the committee. - Names of the members of the ACC are disclosed. Recommendations / Comments: - The external audit opinion accompanying the CBC published financial statements should include signature of the external auditor. - The CBC could consider providing more detailed information on its administrative expenses. - The CBC should consider publishing its Internal Audit policy to clarify the rules governing the internal audit function and reporting structure. - The Bank should state explicitly that its internal audit function “generally complies with international standards for the professional practice of internal auditing” based on the recent external quality review. - The CBC could disclose short biographies of independent/outside members of the ACC; currently only their names are disclosed on the Bank’s website. ### Principle 1.6.3 — Anti-corruption measures and internal Code of Conduct Description: - Section 14 of the CBC Law describes incompatibilities of Board members in terms of positions or service rendered in the private sector. - Section 15 contains procedures and sanctions when Board members infringe dispositions in Section 13 related to proprietary interest of Board members or their relatives up to the third degree of consanguinity or second degree of affinity. - The code of conduct is fully disclosed on the CBC website and there is a link to the “Personnel Code of Conduct”. - The Code of Conduct includes specific details relating to conflicts of interest, professional conduct, purchasing processes, objectivity in recruitment, guidance on external activities, financial and personal investments, outside income, corruption, and the acceptance of gifts. - Subchapter 3.5.4 (Ethics: Questions, Concerns, and Committee) of the 2019 Annual Report describes the members and responsibilities of the Ethics Committee: General Manager, General Counsel, General Auditor, and Human Resources Manager. - The Annual Report refers to a confidential reporting channel available through the CBC “intranet”. - The CBC website has a section regarding “access to information,” including links to forms to access confidential information and disclosures relating to internal whistle-blowing mechanisms. *Source: Appendix 1: International Reserves (excerpts from the CBC assessment and 2019 Annual Report).* ### Section 26 of the CBC Law states that “The control and internal supervision of the ### Section 26 of the CBC Law states that “The control and internal supervision of the ### Governance, Ethics, and Anti‑corruption disclosures - Section 26 of the CBC Law: “The control and internal supervision of the Bank’s accounts, operations and administrative regulations shall be the responsibility of the General Auditor. The General Auditor shall report in writing to the Governor, with a copy to the Board, the comments and objections he may deem appropriate regarding the accounts and operations of the Bank.” - CBC maintains an employee reporting channel for confidential, no‑repercussion reporting of personnel concerns via the intranet. - CBC discloses the Code of Conduct in full, covering: conflicts of interest; professional conduct; purchasing processes; objectivity in recruitment; guidance on external activities; financial and personal investments; outside income; corruption; and acceptance of gifts. - Gaps and transparency issues identified: - Lack of clarity on applicability of domestic anti‑corruption legislation to all members of the CBC (decision‑makers, staff, and agents). - Lack of clarity about post‑public employment restrictions (“cooling off” periods) for Board members. - Insufficient disclosure on internal controls to ensure implementation of the Code of Conduct (e.g., capacity, independence, and authority of Ethics Officer(s)/Advisors). - Ambiguity on “levels of membership” of the Ethics Committee (e.g., Human Resources Manager is an “invitee” rather than a “standing member”). - Recommendations: - Disclose detailed information on applicability of domestic anti‑corruption legislation and clarify applicability to all CBC members. - Enhance accessibility by including narrative on implementation of anti‑corruption measures and anonymized aggregated data (e.g., number of conflicts of interest raised and sanctions, if any) in regularly updated documents such as the Annual Report. - Publish details on internal controls and monitoring mechanisms used to implement and enforce the Code of Conduct. - Disclose functioning, activities, and membership status (invitee vs standing member) of the Ethics Committee. ### Human Capital Management (Principle 1.6.4) - Legal constraint: Section 2 of the CBC Law requires CBC authorities not exercise powers in a way that results in discriminatory regulations versus similar persons/entities. - Strategic planning: “Strategic Planning for 2018–2022” sets five strategic priorities including HCM: “To be an employer of excellence... to attract and retain talent...” - 2019 Annual Report (Letter from the General Manager): highlights leadership and mentoring programs and positive climate survey results. - 2019 Annual Report — Chapter 4.6 (“Our people”) disclosures: - Commitment to employee development and an employee value proposition. - Actions in 2019 aimed at attracting/hiring people of excellence and maintaining a balanced work climate. - Subchapter 4.6.1 (Gender equality and diversity): discloses number of Bank employees by position and gender; notes relatively low share of women in some areas/leadership roles. - Subchapter 4.6.2 (Leadership and culture management): progress on leadership and culture project. - Subchapter 4.6.4 (Training to be better): information on training hours and scholarships granted. - Subchapter 4.6.6 (Work‑life balance): strengthened telecommuting and flexible schedules. - Subchapter 4.6.7 (Labor relations): Labor Union responsibilities include legal advice, well‑being, collective bargaining, scholarships for employees’ children. - Ethics Committee (subchapter 3.5.4): membership composed of the General Manager, the General Counsel, the General Auditor, and the Human Resources Manager; responsible for addressing personnel situations. - Active transparency: website section lists all employees, names, functions and hire dates. - Review findings and gaps: - CBC discloses staff development, leadership, diversity and inclusion information. - No information on staff succession and turnover. - Only general statements on attraction, promotion, and retention; lack of explicit disclosure that recruitment/promotion are non‑political (no references to national laws prohibiting patronage/discrimination). - No disclosure of reporting and review channels between middle/senior management and oversight body for staffing matters. - Recommendations: - Publish the Ethics Committee Charter with roles, responsibilities, and composition (clarify attendance/rights of Human Resources Manager). - Provide quantitative measures tied to the HCM strategy (e.g., succession metrics, turnover statistics). ### Communication (Principle 1.7) - Legal basis: Article 8 of the Political Constitution; Articles 53, 65 bis (1) and 67 of the CBC Law; Law No. 20.285 “Access to public information” establishing “Active Transparency.” - Organizational arrangements: - Institutional Affairs Division created in 2018 to design CBC communication and relationship strategy. - Communication policies jointly determined by Board and senior management; Institutional Affairs Division leads design, implementation, evaluation. - Internal communication policy published and known across the organization. - Transparency Strategy: divided into passive transparency (respond to requests) and active transparency (maintain current information proactively). - Website is primary communication platform; information available in Spanish and English; public digital repository for historical documents and publications. - Tools, cadence, and processes: - Financial and policy dissemination channels include publications, press releases, presentations, interviews, opinion columns, seminars, conferences, and Board participation in events. - Publication calendar: - 4 Monetary Policy Reports: March, June, September (in this case the annual account is added to the full Senate) and December. - 2 Financial Stability Reports: May and November. - 8 monetary policy meetings: January, March, May, June, July, September, October, and December. - Decisions are communicated via statement published at the end of the day. - Minutes are published with a lag of 10 years according to a previously established calendar. - Minutes are published 11 days later (reference also notes minutes with 10 business days lag for some meetings). - CBC issues MPM Communiqué at 6:00 PM the same day, including the vote of each Board member. - CBC announces MPM schedule for the following year in September. - Public consultation platform for normative acts (Article 35 of the CBC Law) and a procedure to handle access to information requests. - Requests for access to information submitted electronically; statutory response time 20 business days, but in practice CBC does not exceed 10 business days. - CBC evaluates communications via monitoring of traditional media and social networks and an institutional reputation indicator covering about 300 media platforms. - Review assessments: - Strategy and tools clearly disclosed; broad menu of communication channels. - Platform and institutional unit for access to information are well structured; all information requests are responded to. - Recommendations/comments: - Continue ensuring timely, accessible disclosure; consider additional plain‑language explanatory materials (noted elsewhere as part of monetary policy transparency). ### Confidentiality (Principle 1.8) - Legal foundation: principle of transparency in section 8 of the Political Constitution; confidentiality policy enshrined in section 66 of the CBC Law. - Sections and matters classified as “reserved” (examples listed): money credit transactions with banking sector (section 34), measures to preserve financial stability (section 36), state representative/fiscal agent role (section 37), international transactions (section 38), foreign exchange authority and related information (sections 40, 42, 49), and banking services to financial institutions (sections 54, 55, 56). - Access to information: - CBC obliged to provide requested information except where classified as “reserved” under section 66 or Transparency Law exceptions. - CBC Board approved rules/instructions to comply with the Transparency Law (policy of “Active Transparency”) and published procedures to manage requests. - When denying access, CBC provides legal reasons; all denials are reviewed by the Public Prosecutor's Office. - Response denial rate is approximately 2 percent per year. - Voluntary transparency practice: CBC makes all responses submitted within the framework of the Transparency Law available on the CBC website, including denied responses. - Review assessment: confidentiality policy is detailed and consistent with law; judicial review is available for non‑disclosure decisions. ### Monetary Policy (Principle 2.1) - Mandate: CBC Law establishes mandate of safeguarding stability of the currency and normal functioning of internal and external payments; safeguarding currency stability implies maintaining low and stable price inflation. - Monetary policy framework: - Adoption of inflation targeting in 2007; framework documented in “Central Bank of Chile: Monetary Policy in an Inflation Targeting Framework” (superseded 2000 document). - CBC committed to keeping annual CPI inflation around 3 percent most of the time, within a tolerance range of plus or minus one percentage point. - Monetary policy executed by influencing the daily interbank interest rate via control of liquidity/monetary base so resulting rate is close to the Monetary Policy Report (MPR) target. - MPR analyzes international environment, financial conditions, output/aggregate demand, price and cost developments, and presents monetary policy strategy for coming quarters. - CBC quarterly publishes the MPR. - Transparency and models: - CBC published an Independent Evaluation Panel report in September 2019 with 40 recommendations; eight refer to monetary policy communication. CBC initiated implementation of Recommendations 18–22 and 24; expected to be completed during 2021. - CBC published “Use of Macroeconomic Models in the Central Bank of Chile 2020”; makes codes of main models available. - Review assessment: comprehensive disclosure of framework, objectives, and supporting analysis; CBC plans to add plain‑language materials and animations on the website. ### Monetary Policy Decisions and Supporting Analysis (Principles 2.1.2 and 2.1.3) - Decision disclosure process: - Policy decisions communicated immediately after each Monetary Policy Meeting (MPM) via official news release (MPM Communiqué) at 6:00 PM same day, including vote of each Board member. - MPR presentation to the Senate in September coincides with an open press conference (streamed and posted on YouTube) and materials used by the Governor are uploaded to the website. - Minutes of MPM published with a lag (minutes noted as published with a 10 business days lag and a 11 days later reference). - In non‑MPR MPMs, a special communication channel to press is opened for questions/clarifications. - Policy measures example (contextual description): - CBC maintained policy rate at its minimum of 0.5 percent for a policy horizon of two years; offered credit lines with short term maturity and expanded eligible collateral to include commercial papers with state guarantee (as described in MPM Communiqués). - Supporting analysis: - MPR provides projections for headline inflation, core inflation, GDP (demand and activity), Current Account, and Monetary Policy Rate for horizons one and two years ahead plus the current year; includes risk analysis for GDP and inflation projections. - CBC staff prepare analytical work and working papers; publishes topical analysis (e.g., coronavirus effects) as MPR Boxes and working papers. - Review assessment: disclosures are detailed and timely; rationale and voting behavior are explained (rationale not individualized but votes reveal names). - Comment: CBC may enhance transparency by providing simplified descriptions of supporting economic information. ### Cross‑Border Financial Flows, Foreign Exchange Administration, and FX Management (Principles 2.2 and 2.3) - Legal/institutional framework: - CBC Law (Subtitle 8, sections 39 to 52) outlines responsibilities on FX administration; Manual of Procedures and Information Forms available on website. - Policy decisions and consultations: - Compendium of FX regulations and public consultations (e.g., modernization of FX regulations, proposal to allow settlement in USD in RTGS) published on website; summaries of consultation comments published, but not individual submissions. - CBC discloses decision‑making roles and shared responsibilities with FMC and MoF where applicable. - Disclosure practice: - CBC communicates objectives, procedures, duration, and exit strategies of FX policy decisions in a timely manner, adjusting detail to market sensitivity. - Alternative policy decisions are not published due to strategic market sensitivity. - Example: November 2019 FX intervention program—some market participants lacked clarity on whether the CBC aimed for a targeted level of the peso despite press‑release clarifications. - Supporting analysis and data: - Board minutes and “Informative Minutes” disclose rationale and analysis backing decisions; CBC provides relevant FX statistics and database (Exchange Rate: observed dollar, foreign exchange parties, nominal exchange rate, real exchange rate Chile, multilateral exchange rate Chile, historical information). - Ex‑post evaluation of FX interventions is not systematically disclosed; example results for November 2019 program were communicated in Board member presentations. - Review assessments and recommendations: - CBC discloses objectives and operational framework broadly, but could clarify intended objectives of specific FX interventions more clearly. - CBC could disclose ex‑post evaluations of FX management policy at a defined frequency. ### Foreign Exchange Reserve Management (Principle 2.4) - Disclosures: - CBC Law and website highlight policy objectives for FX reserves, operative models, strategic framework, currency composition and structure of the CBC Investment Portfolio, and that Investment Portfolio is approved by the CBC Board. - Level and composition of FX reserves disclosed in the September MPR (Annex B) following an investment protocol based on benchmarks. - FSR includes reserve capacity analysis (example: FSR, First Half 2020, Box I.1 “Capital Flows and External Resilience”, pp. 25–27). - Example cited: FX reserves accumulation announced in January 2021 (press release). - Review assessment: - CBC discloses broad objectives, risk exposures (credit and market), governance and oversight allocation, investment structure and constraints, and how decisions interact with FX management and administration. - Recommendations: - CBC could expand transparency by including additional details on investment benchmarks and investment constraints. _Italic source: Content unit 1chlea2021004 - Section 26 of the CBC Law states that “The control and internal supervision of the_ ### Chapter 3 "Monetary Policy Framework," as well as in the document "Financial ### Chapter 3 "Monetary Policy Framework" (and "Financial Policy of the Central Bank of Chile," Chapter 3 “Institutional Framework for Financial Policy in Chile”) ### FX reserves transparency and investment governance - The level and composition of the FX reserves; portfolio are disclosed in the MPR for each September (example: Annex B). - The CBC discloses its decision-making structure, key assumptions, authority and methods to reach its investment and risk decisions, and allocation of oversight responsibility in its Monetary Policy Framework, Financial Policy Framework, and MPR, all of which clear and easily accessible on the CBC’s website. - FX reserves’ investment committee discussions are not published due to their strategic content, and the possible risk of markets reacting in such a manner that it would undermine or seriously deter the scope of the final CBC policy decision. - Review finding: The CBC discloses the rationale and economic analysis of CBC strategic FX investments in the September MPR (Annex B)—see example. - Comment / Recommendation: - With due consideration for market sensitivities, the CBC could consider publishing investment committee discussions with a certain lag (as opposed to not publishing them at all). This would likely take its transparency practices to “comprehensive.” ### Disclosure of assumptions, analysis, and publications - Principle 2.4.3. Supporting Analysis: The central bank discloses the key assumptions and assessment process related to its policy decisions. - Description: The central bank website (Statistics/Foreign Exchange Statistics) contains a link to the CBC Statistics Database. The database (Exchange Rate) provides detailed data on observed dollar, foreign exchange parties, nominal exchange rate, real exchange rate Chile, multilateral exchange rate Chile, and historical information. - The central bank website links to the IMF’s Guidelines Foreign Exchange Reserve Management, including the annex with country case studies that serve as background information for the policy choices of the CBC. - Review finding: The CBC discloses the rational and economic analysis backing its strategic investment and risk decisions/risk policy, and any changes to operational mechanisms. It does so in the September MPR and provides relevant statistics and data on its website. The analysis and relevant data are easily accessible, and published in clear and time manner. - Gap: The CBC does not publish ex-post evaluations of impact of investment and risk assessment at a defined frequency. - Comment / Recommendation: - The CBC could consider setting up a systemic, ex post evaluation of investment impact and risk assessments. This would take the CBC from “expanded” to “comprehensive.” ### Macroprudential framework: objectives, scope, and institutional arrangements - Principle 2.5. Macroprudential: The objectives, decision-making process, and instruments of macroprudential policy are clearly communicated to the public. Indicators and supporting analysis to assess the need for macroprudential measures are disclosed alongside policy decisions. - Principle 2.5.1. Objectives and Framework: The central bank discloses its macroprudential policy framework, including its objectives, instruments, and strategy for achieving its objectives. - Description of CBC framework: - The CBC discloses that its macroprudential policy framework is derived from its financial policy, based on its mandate to ensuring the normal functioning of internal and external payments. - To fulfill this objective, the CBC assumed the role to safeguard the stability of the financial system, within the perimeter of its statutory powers, implemented from a macro financial perspective. - This policy aims at preventing substantial disruptions in credit and other vital financial services necessary for economic growth. - The macroprudential framework focuses on reducing the financial system’s sensitivity to shocks by limiting the buildup of financial vulnerabilities. - It is a continuous, forward-looking analytical framework, which supports a comprehensive diagnosis of potential financial stability risks, vulnerabilities, and mitigators. - The CBC financial stability policy is defined in the document “Financial Policy of the Central Bank of Chile” (FPCBC). - Institutional responsibilities and coordination: - The formulation and implementation of macroprudential policy in Chile is a shared responsibility among the CBC and several governmental agencies, including the MoF, the FMC, the Superintendent of Pensions, and the Financial Stability Board (FSB). - This policy is coordinated and decided within the FSB, which is chaired by the Minister of Finance and made up of the President of the FMC, the Superintendent of Pensions, and the Governor of the CBC in his/her capacity as a permanent advisor to the FSB. - On its website, the FSB discloses three main objectives: (1) to facilitate the oversight of systemic risks; (2) to discuss and propose supervisory, regulatory, or legal changes to address any accumulation of risk; and (3) to organize the response to episodes of financial stress. - The FMC discloses that it has a broad macroprudential mandate, which is to safeguard the proper functioning, development, and stability of the financial market, thereby, facilitating the participation of market agents and promoting the conservation of the public trust. - Operational interaction example: - The CBC communicates that the introduction of a specific macroprudential measure is a coordinated action between the CBC and the FMC. - Example: when the countercyclical capital buffers were introduced, the CBC was responsible for activating the timing of the countercyclical buffer and the calculation of the level of additional capital, following an approval by the CMF. - The FMC issues the regulation defining the operational procedures for calculation, implementation, and supervision of banks’ compliance. This measure is carried out in accordance with section 66 of the General Banking Act. - Under the same procedure, the CBC determines the deactivation of the counter-cyclical buffer and the timeframe to carry out this procedure. This procedure is publicly disclosed on the CBC website. ### Communication, tools, and transparency of macroprudential policy - The CBC communicates its macroprudential policy (i.e., financial policy) to various market agents, including the supervisory authorities, financial sector participants, and the general public through various channels. - Main tools of disclosure: - The main tool of transparency disclosure used by the CBC, in the context of financial policy, is the FSR, published semi-annually. - The FSR is disseminated through presentations to the Senate Finance Committee, government authorities, other specialist groups, and the general public, as well as publication on the CBC website and diffusion in print media and social networks. - Additional tools include explanatory notes and research papers, the publication and issuance of regulations, regulatory manuals and compendiums, and external presentations by the CBC Board members and senior management to various stakeholder groups. The documents are available on the CBC website. - Review finding: Comprehensive - The CBC discloses its macroprudential policy framework, including its objectives, instruments, and strategy for achieving its objectives. - In the FSR, the CBC publishes on a regular basis the underlying analysis and assessment that help to formulate its macroprudential policy strategy, linking its macroprudential policy tools to its macroprudential policy objectives. - The CBC discloses tools such as early warning indicators and stress test results to arrive to macroprudential decision. - Comments / Recommendations: - The CBC may consider further enhancement of its transparency on macroprudential policy framework, by providing more information on its objectives, strategy and instruments in a plain language directly posted on its website. - The CBC may consider, within the co-responsibility scheme, clarify its roles and responsibilities in relation to those of other governmental authorities, including its roles and responsibilities in the FSB. This information should be easily accessible on the CBC website. ### Macroprudential policy decision-making and coordination disclosure - Principle 2.5.2. Policy Decisions: The central bank publicly announces its macroprudential policy decisions in a timely manner, and discloses the decision-making process leading up to macroprudential action. - Description: - Macroprudential policy decisions that are within the remit of the CBC are communicated in a timely manner to the public through reports, press releases and statements. - The disclosure of the decision-making process of macroprudential policy that is co-shared with other authorities is mainly absent on the CBC. - Legal and coordination mechanisms: - The legal framework establishes formal mechanisms for ensuring the necessary level of coordination or joint action among the relevant authorities. Under these mechanisms, which are called prior assessment reports, an agency that is empowered to issue regulations is first required to solicit the prior opinion or assessment of another agency, in specific legally defined cases. - This requirement underlies a tradition of collaboration and articulation between the CBC and the supervisors, where one of the guiding criteria is the adaptation of international best practices to the local reality. - Coordination between the CBC and other authorities that are members of the FSB takes place during the regular meetings of the FSB. However, at the operational level, coordination takes place between the CBC and FMC staff. - The decisions of the FSB are communicated in public communiqués or press releases the same day each decision is made. Also, the minutes of each meeting are published the same day of the meeting on the website of the MoF. *Source: Chapter 3 "Monetary Policy Framework," and Chapter 3 “Institutional Framework for Financial Policy in Chile,” as provided in the supplied content unit.* ### Introduction of new and amendment to existing macroprudential tools that are ### Introduction of new and amendment to existing macroprudential tools that are ### Disclosure and announcement of macroprudential tools - Introduction and amendments to macroprudential tools within the remit of the CBC are publicly announced in a timely manner with due consideration given to frontloading issues. - For areas subject to co-responsibility, frameworks with the respective other authorities are, to a large extent, not disclosed on the CBC website. - The decisions to introduce some specific instruments do not ALWAYS seem clear to stakeholders whether they aim at achieving monetary policy or macroprudential policy objectives. - Comment/recommendation: - The CBC may consider disclosing more information on macroprudential policy decision-making process and how it leads up to macroprudential action. - The CBC should disclose more information on the decision-making processes taken in cooperation with other governmental agents such as the FMC and FSB. This information should be timely and easily accessible on the CBC website. ### Principle 2.5.3 — Supporting analysis (key indicators, rationale, transmission) - Description of current practice: - The CBC discloses that development of financial policy requires a continuous, forward-looking analytical framework to diagnose financial stability risks, vulnerabilities, and mitigators. - CBC responsibilities include preparing analysis for macroprudential policy relying on accessible data, research, analytical tools, continuous review of international experience and best practices. - CBC monitors and assesses financial sector agents (households, firms, and government) and components (intermediaries, markets, and infrastructures), and their interconnections. - Monitoring of key indicators of the local financial system is reported in the FSR, which is published twice a year (June and December). - Stress test results are communicated in aggregate manner in the FSR; early warning exercises are communicated while safeguarding identifiability; ex post evaluations of policy actions are published but not systematically across alternative policy scenarios. - CBC has occasionally carried out qualitative and quantitative evaluations (example: impact on loan-to-value ratio following FSR warnings on real-estate developments). - CBC published a working paper assessing the impact of the FSR message on loan to value ration: https://www.bcentral.cl/contenido/-/detalle/documento-de-trabajo-n-798 - Review expanded: - CBC periodically publishes indicators (early warning indicators and stress test results) and explains how they relate to need for macroprudential action. - CBC publishes statements analyzing financial stability issues and discloses how macroprudential tools are expected to mitigate specific risk. - Comments/recommendation: - CBC may further enhance disclosure by regularly publishing ex post evaluations of various policy actions that examine whether tools had the intended effects, more easily on the website. ### Principle 2.7 — Emergency Liquidity Assistance (ELA) - Description of current practice: - CBC discloses its role as provider of ELA through rigorous processes and measures within its areas of competence; acts as lender of last resort (LOLR) for commercial banks and implements other liquidity management tools in normal and crisis situations. - CBC disclosed unconventional measures during the pandemic aimed at keeping credit flow via the banking system, including information covering interest rate level, duration and level of credit amount, and medium- to long-term asset purchases. - CBC introduced an FCIC (a special financial line for banking companies) with resources and incentives to continue financing and refinancing loans to homes and companies. - In the FPCBC, CBC discloses role to provide liquidity facilities to banks to preserve payments functioning and contain systemic risk; support provided to solvent banks experiencing temporary liquidity shortage when action justified by the bank’s financial situation and to avoid significant losses for the general population. - This type of credit can be extended for up to 90 days, after which a further extension requires a prior assessment by the FMC and a unanimous decision by the CBC Board. - Review expanded: - CBC discloses basic features of systemic liquidity provision (market-wide emergency liquidity support) but does not disclose bilateral ELA scope, objectives, rules and procedures for solvent institutions facing temporary liquidity problems. - Acknowledgement that ELA confidentiality is necessary, but some procedural requirements and principles could be disclosed. - Comments/recommendation: - CBC may consider increasing transparency on ELA by clarifying whether market-wide introduced measures are taken from a monetary policy or financial stability perspective. - Without diminishing CBC discretion, CBC should provide information on ELA covering preconditions and eligibility (such as ELA solvency criterion for credit institutions), conditionality (monitoring and information collection), level of penalty interest rate charged by the CBC, type of collateral, maturity, currency, risk management procedures such as haircut, etc. ### Principles not applicable or not implemented in this unit - Principle 2.6 Microprudential Supervision: Not Applicable. - Principle 2.8 Resolution: Not Applicable. - Principle 2.9 Financial Market Infrastructures: Not Applicable. - Principle 2.11 Consumer Protection: Not Applicable. - Principle 2.10 Financial Integrity: - (a) CBC is not engaged in AML/CFT supervision: Not Applicable. - (b) CBC does not disclose description of its internal control framework relating to activities that may give rise to ML/TF risk: Review — Not Implemented. - Comment/recommendation: CBC should disclose a description of its internal control framework relating to activities or services that may give rise to ML/TF risk. ### Pillar III — Central Bank Operations: Principle 3.1 Monetary Policy (operational framework, instruments, collateral, access) - Principle 3.1.1 Instruments — Description: - CBC discloses monetary policy operational framework in the Compendium of Monetary and Financial Regulation (CMFR), compiling CBC regulations. - Framework implemented using various instruments to ensure the two-year inflation forecast is 3 percent, independently of current inflation level. - CBC identifies scenarios of macroeconomic development and monetary policy trajectory; analyzes impact on inflation projections, evaluates policy alternatives, then decides policy course and instruments to use. - Features and use of various instruments described in “Chile’s Monetary Policy: Within an Inflation-Targeting Framework”. - CBC conducts monetary policy by influencing daily interbank interest rate determined by supply and demand for liquidity; controls supply of liquidity and monetary base so resulting interest rate is close to the monetary policy rate. - Reserve requirement can be used; supply of liquidity is affected by maturing CBC issued bonds and discount promissory notes and by issuing new debt instruments. - Main tools/facilities: liquidity credit line and liquidity deposit; both allow market players to stabilize interest rate around the Central Bank’s target. - CBC uses auctioned procedure for discount promissory notes and peso-denominated bonds (BCP) with various maturities; an annual calendar establishes issues falling due in more than one year. - Link between monetary policy framework and instruments discussed in document “An Overview of Inflation-Targeting Frameworks: Institutional Arrangements, Decision-making, and the Communication of Monetary Policy”. - Review: Comprehensive. - Comment/recommendation: - CBC may consider updating “Chile’s Monetary Policy: Within an Inflation-Targeting Framework” to cover the recently introduced unconventional monetary policy instruments. ### Principle 3.1.2 Coverage (instrument characteristics and collateral framework) - Description: - CMFR discloses types of monetary policy instruments including open market operations, standing facilities, other facilities, reserve requirements, liquidity credit lines with collateral guarantee and currency swap contracts. - CBC publishes rules, procedures, terms and conditions of reserve requirement specifying institution types, calculation of obligations in national and foreign currency, remuneration, etc. - Changes to reserve requirement regulation are immediately communicated via circulars and press releases on the website detailing modifications and reasons. - CBC publishes financial conditions and features of operations (maturity, interest rate, auction method, guarantees and haircuts, etc.) and results of operations regularly. - CBC announces auction outcomes daily, including amounts, rates, allowed collateral, cost of operations and other characteristics. - CBC publishes an MPR four times a year, explaining expected movement of macroeconomic variables and Board expectations of monetary policy rate trajectory. - Review: Comprehensive. - Comments: None specified. ### Principle 3.1.3 Access (monetary policy counterparties) - Description: - Criteria and general conditions to authorize financial institutions and other agents to operate as monetary policy counterparties are published in rules applicable to transactions in CBC debt instruments on the CBC website. - Eligible institutions: banking companies, financial institutions, and agents authorized to operate in the primary market that comply with financial and operational conditions and minimum technical requirements. - Annex 1 of CMFR contains list of institutions and agents that can operate in primary market and thereby be monetary policy counterparts, including banking companies, pension fund administrators, Unemployment Fund Administrator, insurance companies, mutual funds, securities brokers/dealers. - Review: Comprehensive. - Comment/recommendation: - CBC may wish to disclose information on monetary policy counterparties segregated from the list of primary market participants. ### Principle 3.2 Cross-Border Financial Flows and FX Administration (instruments and scope) - Principle 3.2.1 Instruments — Description: - CBC law (Subtitle 8, sections 39 to 52), referred to on the CBC website, outlines CBC responsibilities regarding FX operations. - Website clarifies how CBC may establish exchange limitations and restrictions, despite Chile’s free-floating exchange rate regime. - Regulations are contained in the “Compendium of Foreign Exchange Regulations and its Manual of Procedures and Information Forms,” determining requirements, general provisions, and instructions to operate in the Chilean exchange market; includes brief descriptions of each regulatory instrument. - Annual Report 2019 (English version, p. 66) notes that regulations were modernized and simplified in 2019 as part of the CBC’s Strategic Plan 2018-22, after a public consultation process. - Review: Comprehensive. - Comments: None specified. ### Principle 3.2.2 Coverage — Description and review - Description: - Compendium and Manual contain regulatory framework; CBC website has separate FX section and an FAQ to provide general guidance on exchange regulations. - Review Expanded: - Compendium, Manual, and relevant forms disclose types of activities, persons, and transactions; rules and conditions; detailed licensing/approval requirements; considerations underlying CBC decisions; procedure for granting licenses/approvals; role and responsibilities of the Board; reporting requirements; relevant forms; types of entities and transactions subject to monitoring; types, scope and procedure for non-compliance sanctions; types of entities/individuals having access to FX operations. - CBC publishes an easily accessible FAQ on granting of licenses/approvals and access to other policy instruments. - CBC does not disclose whether there is a timeframe within which a decision must be made and communicated to persons affected by a rejection of a request for a license/approval. - Comment/recommendation: - CBC could disclose whether it has a (legally or otherwise defined) timeframe for communicating the rejection of a request for a license/approval to affected persons. ### Principle 3.3 Foreign Exchange Management — Instruments - Description: - Although Chile has a free-floating exchange rate regime, CBC has legal power to intervene in the exchange rate market in exceptional circumstances via foreign exchange operations and/or supplying derivative instruments. - CBC’s website (Financial Policy) contains an overview of the types of interventions. *Source: 1chlea2021004 - Introduction of new and amendment to existing macroprudential tools that are; https://www.imf.org/-/media/files/publications/cr/2021/english/1chlea2021004.pdf* ### Chapter 2.4 of the Compendium of Monetary and Financial Regulation discloses ### Chapter 2.4 — Compendium of Monetary and Financial Regulation (CBC transparency assessment) ### Foreign exchange (FX) management and interventions - Findings: - Chapter 2.4 of the CMFR discloses the choice of instruments, modalities, characteristics, and so on. - Operating Regulations for Bids and Counter Operations for the purchase or sale of FX swaps are disclosed on the CBC’s website. - The CBC publishes “lessons from the latest foreign exchange intervention” and daily bidding operations on its website. - The Annual Report 2019 notes the rationale for the intervention (up to 20 billion USD) announced in November 2019, described as responses to events of October 2019 to “mitigate the problems in the markets, ensuring liquidity and reducing volatility”. - The November 2019 intervention was approved by the Board on November 28, 2019, and ran from December 2, 2019, till May 29, 2020. - The CBC discloses financial conditions of each operation (amounts, rates, allowed collateral, cost of operations and other characteristics). - Review assessments: - Review: Comprehensive (framework, instruments, counterparties, eligibility criteria disclosed). - Comment: Rationale for specific FX interventions was not always fully clear at announcement; CBC could examine how to disclose intended objectives of specific FX interventions more clearly. ### Coverage of FX management - Findings: - CBC discloses the markets and agents targeted by FX management, instruments and modalities (CMFR Chapter 2.4). - Daily publication of operations and detailed financial conditions for each operation. - Review: Comprehensive. - Comment: None specific beyond disclosure clarity suggestions noted above. ### Foreign exchange reserve management (Principles 3.4–4.4) - Governance & instruments: - CBC Law sets legal requirements; the Board approves an Investment Policy that is periodically reviewed. - The website discloses a Summary of the International Liquidity Spreadsheet of June 2020 and the document “Management of International Reserves of the Central Bank of Chile 2019.” - The CBC notes that management is conducted by external administrators and discloses approximate portfolio size. - Reserve operations and transparency examples: - FX reserves purchases announced in January 2021 (press release) noted specific objectives, operation window, timelines, and links to overall FX reserve management policy. - Findings on disclosures: - The 2019 Reserve Management Report and Annual Report include institutional framework, investment policies, composition, eligible assets, external management, asset loans, risk management and profitability. - Monthly financial statements and SDDS-aligned monthly disclosures of official reserves and other foreign currency assets are published. - Review assessments: - Principle 3.4.1 Instruments — Comprehensive. - Principle 3.4.2 Coverage — Core (broad criteria disclosed; rules/procedures for selection of counterparties, custodians and aggregated exposures not disclosed). - Principle 3.4.3 Assessment — Comprehensive (annual liquidity stress tests and reserve adequacy assessments published). - Principle 4.4.1 Governance Actions — Comprehensive. - Principle 4.4.2 Reporting on Implementation — Comprehensive (monthly level and composition of reserve assets, short-term liabilities, drains; SDDS). - Principle 4.4.3 Financial Results — Comprehensive (2019 audited financial statements and Annual Report disclosures). - Comments / Recommendations: - CBC could disclose rules and procedures for selection of markets, counterparties, custodians, and service providers, and disclose aggregated exposures at a defined frequency and time lag to reach “expanded” or “comprehensive.” - CBC could consider disclosing whether it performs annual liquidity stress tests (noting it does perform and publish them, but comment suggests clarity). ### Financial stability assessments and stress testing (Principles 3.5, 3.6) - Financial stability assessments: - CBC publishes semiannual Financial Stability Report (FSR) assessing risks and vulnerabilities across households, firms, markets, and institutions. - Methods and scenarios used in assessments and aggregate data are disclosed (disaggregated institution-level data withheld for data protection). - Stress testing methods and coverage: - CBC discloses parameters, design of macroeconomic stress scenarios, risks covered, underlying assumptions, and methodologies in FSRs and technical papers (e.g., Working Paper number 610, February 2011). - Stress tests examine adverse changes in economic activity, interest rates, and the exchange rate on banks’ profitability and capital, and cover credit, liquidity, and foreign exchange risks. - Ad-hoc stress tests target specific sectors (households, firms) with multiple macroeconomic scenarios; results are published in the FSR. - CBC provides relatively granular information on stress test parameters and models (presented notably in the FSR of 2013). - Use of stress test results: - CBC discloses how aggregate stress testing results may affect policy decisions in the FSR (Box 2) and at a high level alerts to potential risks and impacts on profitability and capital. - Review assessments: - Principle 3.5.1 Financial Stability Assessments — Comprehensive. - Principle 3.5.2 Macroprudential Stress Testing Methods — Comprehensive. - Principle 3.5.3 Stress Testing Coverage — Comprehensive (types of agents covered disclosed; names of participating institutions not disclosed due to confidentiality). - Principle 3.5.4 Central Bank Use of Stress Test Results — Comprehensive (high-level disclosure; limited concrete follow-up detail). - Principle 3.6.1 Instruments (macroprudential design and objectives) — Comprehensive. - Principle 3.6.2 Enforcement — Comprehensive (law discloses enforcement mechanisms and responsibilities; CFR details regulations and enforcement; penalties in sections 58 to 65 of CBC Law). - Comments / Recommendations: - CBC may enhance transparency by providing more detailed technical information in each FSR (e.g., a box or table). - CBC may consider disclosing names of institutions covered where feasible without breaching confidentiality. - CBC may consider disclosing more concrete and detailed information on how stress test results are used to formulate new financial policy measures. ### Macroprudential policy implementation and enforcement - Findings: - CBC discloses macroprudential instruments and framework in the FPCBC, and consults publicly before enacting major changes; consultation comments summarized and attached to final regulation text. - The General Banking Law grants CBC powers on reserves, derivative operations, countercyclical capital buffers, overseas investments, but requires CMF approval before finalizing some regulations. - Enforcement responsibilities are shared across CBC and other agencies; CFR details enforcement and regulations; penalties specified in the CBC Law. - Review: Comprehensive. - Comments: - CBC may further enhance disclosure by informing about its limited power to enforce macroprudential tools that are enforced by the CMF and other agencies. - CBC could consider publishing agreements or MOUs that clarify roles with other authorities to improve allocation-of-responsibilities transparency. ### Emergency liquidity assistance and exceptional measures (Principles 3.8, 4.7) - Findings: - CBC disclosed market-wide exceptional measures adopted in response to the health emergency declared in March 2020, summarized in an accessible table covering instruments, terms and condition, eligibility, duration. - The FCIC is highlighted as the quantitatively largest unconventional instrument (medium-term liquidity measure at low cost to banks). - CBC discloses market-wide liquidity support forms and provides timely information on amounts, maturity, and financial parameters; no information on bilateral, case-by-case ELA to individual institutions. - March 2021 study reviewed the monetary and financial policy response to COVID-19 and analyzed impacts of liquidity support measures on the economy and CBC balance sheet. - Review assessments: - Principle 3.8 Emergency Liquidity Assistance — Expanded (market-wide measures disclosed at aggregate level). - Principle 4.7 ELA — Core (announcement and aggregate results disclosed; limited regular reporting on how measures contributed to restoring stability; limited disclosure on risk-taking). - Comments / Recommendations: - CBC may consider disclosing whether it has provided bilateral liquidity support to specific financial entities at an aggregate level without naming recipients. - CBC may consider creating a framework to disclose how and to what extent exceptional liquidity support measures contributed to restoring/maintaining financial stability and the central bank’s risk exposure related to the support. ### Consumer protection and AML/CFT - Findings: - CBC is not engaged in AML/CFT supervision (principle not applicable for first part). - CBC does not disclose details about resources allocated to its internal AML/CFT controls. - Review assessments: - Principle 3.11 (Financial Integrity): (a) Not Applicable; (b) Not Implemented. - Principle 4.10 (Financial Integrity): (a) Not Applicable; (b) Not implemented. - Comments / Recommendation: - CBC should disclose details about resources allocated to its internal AML/CFT controls and the oversight of those controls. ### Monetary policy transparency and operations (Pillar IV) - Governance and reporting: - CBC Board submits the Monetary Policy Report (MPR) in September to the MoF and the Senate; MPR aims to inform on evolution of inflation and provide the medium-term analysis framework. - Additional MPRs delivered in March, June, and December to MoF and Senate Finance Committee; minutes and background minutes published; vote of each Board member in the Monetary Policy Meeting (MPM) communicated since 2018. - CBC publishes “Monetary Policy of the Central Bank of Chile: Objectives and Transmission” and a range of periodic reports and statistics (daily, monthly, quarterly, every four months, every six months, annually). - Policy targets and communication: - CBC communicates inflation target: 3 percent annual inflation in a horizon of two years and that should fluctuate within a 2 percent to 4 percentage. - CBC discloses progress toward achieving monetary policy objective in MPRs and may recalibrate policy when outcomes deviate (example: MPR September 2019 noted potential need to increase monetary stimulus). - CBC issues daily operational target level and discloses volumes, interest rates, outstanding volumes of each instrument, aggregated bank reserves, and auction results. - Review assessments: - Principle 4.1.1 Governance Actions — Comprehensive. - Principle 4.1.2 Policies — Expanded. - Principle 4.1.3 Operations — Comprehensive. - Comments / Recommendations: - CBC may consider publishing methods, techniques, and data underlying dedicated monetary policy evaluations to ensure consistency in communication of inflation targeting. ### Cross-border flows, FX administration and outcomes (Principles 4.2–4.3) - Findings: - Exchange Regulations and Compendium of International Exchange Regulations (CBC website) set rules requiring certain transactions to be channeled through the FEM and reported to the CBC. - CBC Law (Subtitle 8) establishes legal requirements for FX management; Board issues “General Guidelines for the Management of International Reserves”. - CBC discloses regulatory framework, actions taken, and outcomes via FSR, Annual Report, MPR, Q&As, statistics, and daily reports of domestic financial transactions. - CBC publishes daily results of FX operations and aggregated monthly data in line with SDDS. - Review assessments: - Principle 4.2.1 Governance Actions — Comprehensive. - Principle 4.2.2 Policies — Comprehensive. - Principle 4.2.3 Implementation — Comprehensive. - Principle 4.3.1 Governance Actions — Comprehensive. - Principle 4.3.2 Policies — Comprehensive. - Principle 4.3.3 Operations — Comprehensive. - Comments: - CBC does not explicitly specify delegation of implementation to other entities in published materials; could clarify where relevant. ### Macroprudential outcomes and evaluations (Principles 4.5) - Findings: - Macroprudential policy objectives and actions are coordinated across CBC, MoF, CMF, SP, and other authorities through the FSC. - CBC discloses forward-looking diagnostics and statistical information and has conducted ex post evaluations, including a March 2021 study on COVID-19 responses and a working paper assessing FSR warnings. - Review assessments: - Principle 4.5.1 Governance Actions — Expanded (accountability disclosed within remit; allocation with other agencies not fully clear). - Principle 4.5.2 Policies — Comprehensive (ad-hoc ex post evaluations via working papers). - Comments / Recommendations: - CBC may consider publishing regular dedicated policy evaluations of specific macroprudential tools, including methods, techniques and underlying data. - CBC may consider disclosing key interaction areas and roles within the FSC and with the CMF to clarify accountability. ### Relations with government and domestic financial agencies (Pillar V) - Relationship with government: - CBC–government institutional relationship is disclosed in the CBC Law (roles as advisor and coordinator; Minister of Finance may attend Board meetings; section references in law provided). - The CBC is required to inform President and Senate and compile/publish macroeconomic statistics; MOUs exist with multiple public institutions though full texts are not published in many cases. - Section 66 of the CBC Law classifies as “reserved” certain information on transactions with government funds; only aggregated or non-personalized statistical information may be published. - Financial transactions and fiscal agency: - Fiscal agency role information appears in Annual Reports and MOF publications (agency decrees published in the Official Gazette and MOF website). - CBC Law sections permit opening checking accounts for Treasury (section 55) and requesting guarantees (section 56); section 27 allows temporary purchase of Treasury debt instruments in exceptional circumstances. - Transparency assessments: - Principle 5.1.1 Institutional relationship — Core (legal framework disclosed; MOUs not fully published). - Principle 5.1.2 Policies and terms with government — Core (not regularly disclosed by CBC; MOF publishes some information). - Principle 5.1.3 Instruments used in interactions — Core (instruments disclosed in MOF decrees; CBC does not routinely disclose full details). - Principle 5.1.4 Outcomes of interactions — Core (aggregated/statistical info disclosed; full operational outcomes often reserved). - Principle 5.2.1 Relationship with domestic financial agencies — Core (legal framework and interactions exist; MOUs not published). - Principle 5.2.2 Policies and instruments in interactions — Core (MOUs generally not publicly disclosed; press releases used for general information). - Comments / Recommendations: - CBC could publish or link to public information disclosed by the MoF or FSC (including FSC minutes and details on CBC role) to improve transparency. - CBC could disclose MOUs or reference other agencies’ publications about coordination, unless legally restricted. - CBC should disclose, where legally allowed, information about interactions, cooperation, and information-sharing frameworks and outcomes with governmental agencies. - CBC could clarify bilateral processes for cooperation and information sharing with the FMC (CMF) and other domestic financial agencies beyond press releases. *Source: 1chlea2021004 - Chapter 2.4 of the Compendium of Monetary and Financial Regulation discloses* ### references to press releases done by or in conjunction with public financial ### 1chlea2021004 - references to press releases done by or in conjunction with public financial agencies ### Cooperation and disclosure with domestic financial agencies - Legal framework contains provisions establishing cooperation between the CBC and domestic financial regulatory and supervisory authorities, and basic terms and conditions for coordination of activities. - The FSC, of which the CBC attends as a permanent advisor, discloses the outcome of its meetings; the CBC does not disclose information on such interaction and its outcome. - Recommendation: The CBC should explain and disclose further the regulatory process made in conjunction (check and balances mechanism) with the FMC, as established in legislation (the GBL). The explanation should be accessible to the general public on the CBC website, showing how the task established by the GBL is implemented in practice. - Comments: Policies and rulemaking used in the interaction of the CBC with domestic financial agencies should be part of a periodic and systematic system of disclosure. The mechanism for information sharing and cooperation arrangements should be disclosed further and not only in press releases. This will facilitate understanding of the allocation of responsibilities between entities. ### Macroprudential policy disclosure and roles - Principle 5.2.3: The central bank discloses its role, responsibility, and actions—and those of any other authority it collaborates with. The central bank also discloses any advice it receives. - Description: - The CBC website has a “Compendium of Macroprudential regulations and policies”. - The Financial Stability Report (issued every 6 months), and Chile’s Monetary Policy within an Inflation Targeting Framework, disclose CBC role and responsibilities in this area. - Section 66 ter of the General Banking Law authorizes the CBC for the activation of the Counter-Cyclical Capital Buffer (CCyB). Activation is a sole decision of the CBC; for fixing the rate of the CCyB, the same legal provision requires the favorable prior opinion of the CMF. - CBC Legal Department: “In general, the CBC does not share responsibility regarding its mandate, its powers are exclusive. However, in those exceptional situations where the law requires the conformity of another authority to adopt a certain decision (i.e., the FMC providing a positive opinion for the adoption of certain regulations or for fixing the rate of the CCyB) responsibilities and roles are clearly allocated by the law. - “When the CBC receives information from another agency, it must maintain that information under reserve, in most of the cases, so it is not disclosed to the public.” - Review Core: There is a legal framework (CBC Act and GBL) for CBC with respect to macroprudential policy that clearly allocates responsibilities to the CBC. The legislation also establishes measures on macroprudential policy making that might be taken in coordination with the FMC. - Disclosure: The Central Bank discloses information on macroprudential measures taken by the CBC and in conjunction (or with the participation) of the FMC via the FSR and the Compendium on Macroprudential Regulation. - Comments: The CBC provides very rarely information about ongoing cooperation between the CBC and CMF. Example: introduction of the capital buffer was disclosed by a press release by the CMF, published on its website. ### Financial stability arrangements and disclosure - Principle 5.2.4: All arrangements to restore or maintain financial stability are clearly disclosed, including arrangements on data sharing, liquidity support, and who is responsible for which type of decision or action at what stage. - Description: - Financial stability arrangements where decision making is coordinated among relevant authorities including the CBC fall within the FSC. - The CBC has shared responsibility for developing and implementing rules and regulations for financial stability. - Introduction of new rules and amending existing ones are discussed and, in some cases, approved by the CMF before implementation. - Some regulation introduced by the CBC is enforced exclusively by the CMF (e.g., prudential rules on banks). This information is disclosed by the CBC. - Reference document: https://www.bcentral.cl/documents/33528/133277/PoliticaFinacieraBCCh2020.pdf /38565a87-f41f-660f-1757-b86ab757f9bd?t=1582645822180 - Observations: - Less published information by the CBC on ongoing cooperation and coordination of macroprudential policy issues with other governmental agencies, particularly the FSC. - Disclosure of those arrangements is made through press releases, sometimes made in conjunction between the FSC and CBC. On a regular basis the disclosure of information is made by the FSC. - Recommendation: Encourage publication, dissemination and disclosure of financial stability arrangements and outcomes on the CBC website, including those made public by other financial entities in coordinated settings. ### Relations with foreign agencies and disclosure - Principle 5.3: The central bank discloses its dealings with international organizations, foreign governments, other central banks, and other relevant foreign agencies, including the nature of the involvement or interactions, and any obligations and commitments that may arise. - Description: - Section 22 of the CBC Law determines the task of the CBC with international organizations and other foreign financial institutions. - Section 38 (of “reserved nature” according to section 66) determines the CBC tasks in international transactions in general. - International agreements are disclosed if they become legislation (legislation is public in nature). - The CBC does not disclose texts of Cooperation agreements, MOUs, or other arrangements with foreign agencies; some may fall under legal reserve under section 66 (e.g., security measures to avoid banknote counterfeiting). In some cases, with authorization of the other signatory, the CBC issues a press release informing its subscription. - Assessments by independent panels or recommendations by international organizations—under explicit authorization—can be found on the CBC’s website or referred therein by press release (for instance, IMF reports). - The CBC publishes on its website general guidelines that regulate interaction with foreign institutions: ‘Normas aplicables a Institutions Extranjeras’. - Some international agreements ratified by Congress are published as legislation; example: Law No. 8403 of 29 Dec 1945 ratifies the Agreement with the IMF. This Treaty is implemented by the CBC. - The agreement with the BIS is implemented under Board Resolution No. 1073-04-030710. - The CBC has a policy to publish outcomes of financial transactions with international entities: financial transactions are published on the website, annual reports, other major reports and disclosed to the Senate, apart from press releases. Example: a CBC press release disclosed arrangements with the IMF for CBC access to the Flexible Credit Line, FCL. - Review Core: Frameworks of cooperation, co-decision making modality, or arrangement for formal sharing of information with foreign agencies are disclosed as international agreements; those that become legislation are public. The CBC Act establishes CBC tasks with international agents and basic terms and conditions of such interaction. - Observations and recommendations: - The CBC website provides disclosure of policies, cooperation and information sharing with international organizations mostly through press releases. - Disclosure of information sharing with foreign agencies could be enhanced (e.g., CBC membership in the International Operational Risk Working Group (IORWG) is disclosed on IORWG’s website but not clearly on the CBC website). - The CBC could consider disclosing exchanges of information and coordination of actions with international agents when counterpart allows, and disclosing a list of organizations of which it is a member, explaining the importance of those relations/agreements. ### Other relations - Principle 5.4: The central bank discloses its involvement with private or semi-public institutions. - Description: Not Applicable - Review: Not Applicable - Comments: Not Applicable ### Authorities response to the detailed review and proposed actions - Context and summary: - The Board of the Central Bank of Chile (CBC) thanks the IMF for the pilot review of the Central Bank Transparency Code (CBTC). The Mission met virtually between March 3–18 with the Board, managers, staff, and external stakeholders. - The CBTC was approved in July 2020 and updates the 1999 Monetary and Financial Policies Transparency Code; it aligns with recommendations made in 2017 by the Joint Review of the Standards and Codes Initiative. The CBC requested a review of all five pillars of the CBTC. - The Mission noted the CBC “has implemented broadly advanced transparency practices.” Strengths cited include: legal structure and disclosure of legal nature, mandate and autonomy; high level of transparency of monetary policy framework; clear disclosure of cross-border financial flows and foreign exchange administration issues; disclosure of macroprudential policy framework; and a solid confidentiality mechanism in the CBC Act. - Areas for improvement identified: enhance ELA disclosure; improve conveying the CBC message to the general public; improve disclosure practices of official relations with the government and domestic public financial agencies. - The Mission provided ten Key Recommendations across the five CBTC pillars. The CBC proposes a roadmap classified under (i) “Immediate implementation”; and (ii) “Implementation subject to further analysis.” The Board estimates a period equivalent to the course of this year for implementation of all recommendations. - Table 1 — Selected proposed actions to the CBTC Review “Key Recommendations”: 1. Enhance disclosure of information regarding the legal structure by assembling relevant information on the webpage and explaining the rationale behind the legal framework, including the role of the Minister of Finance on the CBC Board, the legal foundation of its financial stability mandate and macroprudential policy and the rules on monetary financing. - Immediate implementation: Gather information that already exists (Constitutional Organic Law of the CBC, “Financial Policy of the Central Bank of Chile”, documents related to public consultations for the issuance of banking regulations), summarize in non-technical language, publish under menu items “The Bank”, “Corporate Governance” (“Functions of the Bank”), and “Areas”, “Financial Policy”. 2. Disclose more comprehensive information relating to the applicability of domestic anticorruption legislation and clarify applicability to all members of the CBC, including decision-makers, staff, and agents. - Immediate implementation: Publish regulations that govern personnel on CBC’s website under “The Bank”, “People”; summarize CBC role within current legislation in “Central Contact” menu with hyperlinks to institutions in charge of AML/CFT. 3. Disclose a description of the CBC internal control framework relating to activities or services that may give rise to AML/CFT risk. - Immediate implementation: Publish internal control framework on AML/CFT under “The Bank”, “People” and make public what type of actions classify as AML/CFT offenses. 4. Strengthen transparency of the risk management function by publishing a risk statement defining acceptable risk taking, providing high-level overview of key risks mapped to its mandate, and disclosing the process of continuous identification, evaluation, and mitigation of risks. - Immediate implementation: Incorporate Risk Management Area on the website under “Areas” alongside monetary policy, financial policy, financial markets, statistics, regulations, payment system, economic surveys, research, Technological Observatory, and Banknotes and Coins; detail functions, objectives, and a summary of the risk methodology used. 5. Publish the charters/by-laws of the Audit and Compliance Committee, the Risk Committee, and the Ethics Committee to inform public stakeholders about roles, responsibilities, reporting lines, and composition. - Implementation subject to further analysis: Committees have by-laws and operating standards, including confidentiality statements. CBC will review what can be made public; external committees information to be made public before internal committees, internal committee confidentiality will be analyzed. Operations (not outcomes) of strategic advisory committees are reported in the Annual Report. 6. Disclose the methods, techniques, and data underlying dedicated monetary policy evaluations. - Immediate implementation: Monetary policy communication strategy within the inflation targeting framework is strong. Independent external evaluations (e.g., 2019 Independent Evaluation Panel) are publicly available on the website under “The Bank”, “External Evaluations”; milestones, final reports and action plans will continue to be communicated in a timely manner. *Source: 1chlea2021004 - references to press releases done by or in conjunction with public financial agencies.* ### 7. Enhance the disclosure ### 7. Enhance the disclosure ### Recommendation 7 — Publish ex post evaluations of macroprudential policy actions - There are several evaluations of macroprudential policy actions carried out by the CBC as well as by external authors and institutions. - Typically, these evaluations take the form of academic exercises and are published in the corresponding CBC research series, or as a special topic within the Financial Stability Report (e.g., FSR 2020.I, Ch. 4). - Proposed CBC action: gather and order existing evaluations on the webpage menu item “Areas”, “Financial Policy”. - The appropriateness of citing academic studies published by external authors will be considered. ### Recommendation 8 — Consider disclosing whether the CBC has provided bilateral liquidity support to specific financial entities - Suggestion: disclose liquidity support at the aggregate level without naming receiving entities to avoid violating confidentiality requirements. - Legal constraint: disclosure is constrained by Section 66 of the CBC Law, which establishes confidentiality and reserve. - Risk noted: even disclosure of aggregate or partial information might allow easy deduction of the involved entities given the size of the Chilean market and the potential ripple effects on the internal market. - CBC transparency commitment and practical steps: - In the MoU under discussion with the CMF, provision to provide determined information to the market about these operations after a due time. - Each ELA contract to be subscribed with the CBC should include a waiver of confidentiality clause by the corresponding banking entity, to be applied once said time has elapsed. - The CBC will consider explaining in more detail the ELA mechanism recently taken in place, summarizing different press notes in a non-technical language. ### Recommendation 9 — Examine how to (ex-ante) disclose intended objective(s) of FX interventions and ex post evaluations - Context: Chile operates an expected inflation target framework of 3 percent over a 24-month horizon, with free capital mobility and a free-floating exchange rate. - Historical note: agents’ expectations have been anchored for more than 20 years; CBC interventions in the FX market have occurred 5 in 20 years. - Characterization of interventions: - FX interventions are extremely specific and state-dependent. - Interventions do not aim at a specific FX level, nor at the same objective each time. - This creates the challenge of specifying a flexible but relevant environment for conducting FX interventions. - Current communication: the general framework for FX interventions is communicated in the document “Chile’s Monetary Policy Within an Inflation-Targeting Framework”. - Proposed CBC actions: - Reinforce and clarify the objective of FX interventions at the time they occur, together with the rationale under the inflation targeting framework. - Consider disclosing material with ex post FX interventions evaluations. - When an intervention occurs, publish both a press release and a related Q&A on the web page. - Update internal protocols to include in those press releases information about the motivation, objective, and desired outcomes under the intervention, as well as details about amounts, terms, and rates. ### Recommendation 10 — Strengthen transparency on official relations with government and domestic/foreign agencies - In line with the response to recommendation 4, the risk area will be considered at the same level as monetary policy, financial policy, financial markets, among others. - Proposed website action: create a new section named “Official Relations” under “Areas”, distinguishing between national and international institutions. - Possible disclosures (within legal frameworks of the CBC and third parties): - The legal and factual status of the CBC’s relationship with other bodies. - Joint events. - Regular information flows. - Persons in charge and their selection standards. - Any other possible information permitted by the legal framework. *Source: 1chlea2021004 - 7. Enhance the disclosure* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1chlea2021004.pdf_