## IMF Executive Board Concludes Financial System Stability Assessment with Chile

_IMF News, December 9, 2021_

## Source details

**Canonical URL:** [IMF Executive Board Concludes Financial System Stability Assessment with Chile](https://www.imf.org/en/news/articles/2021/12/09/pr21367-imf-executive-board-concludes-financial-system-stability-assessment-with-chile)

## Other formats

- [Markdown version](/en/news/articles/2021/12/09/pr21367-imf-executive-board-concludes-financial-system-stability-assessment-with-chile/index.md)
- [Structured JSON version](/en/news/articles/2021/12/09/pr21367-imf-executive-board-concludes-financial-system-stability-assessment-with-chile/index.json)
- [Bundle manifest](/en/news/articles/2021/12/09/pr21367-imf-executive-board-concludes-financial-system-stability-assessment-with-chile/bundle-manifest.json)

## Bibliographic details
- Published: December 9, 2021

---

### Press and procedural details
- Press Release No. 21/367
- Date: December 9, 2021
- IMF Communications Department, MEDIA RELATIONS
- PRESS OFFICER: David Sharrock
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org
- The Executive Board concluded the FSAP with Chile on December 3, 2021 without a meeting under the lapse-of-time procedure.

### Scope, missions, and report timing
- Financial Sector Assessment Program (FSAP) remote missions to Chile during March-April and July-August 2021.
- Financial Sector Stability Assessment (FSSA) report completed on November 17, 2021.
- The FSAP is a comprehensive assessment established in 1999; FSAPs are mandatory for the 47 jurisdictions with systemically important financial sectors and otherwise conducted upon request. Key findings are summarized in an FSSA.

### Overall assessment
- Conclusion: The financial system in Chile functions well overall within a sound regulatory framework.
- The FSSA found that the twin shocks of social unrest in late 2019 and COVID-19 were adeptly managed due to:
  - Massive and well-coordinated supervisory and fiscal policy responses.
  - Unprecedented liquidity support from the Central Bank of Chile (BCCh).

### Liquidity risks and recommended reforms
- Events noted:
  - Mutual and pension fund redemptions during 2019.
  - Subsequent BCCh crisis measures used to relieve shock impacts highlighted structural liquidity risks.
- Recommendations:
  - Strengthen the liquidity management framework for mutual funds.
  - Develop the interbank repo market.
  - Strengthen central bank risk management practices.

### Pension system findings and recommendations
- Observation: The funded pension system, instrumental in market deepening, is under threat in part due to a series of withdrawals.
- Recommendations:
  - Halt further pension withdrawals and life annuity liquidations.
  - Improve pension fund regulation and investment options to promote long-term investment and minimize excessive portfolio switching.

### Regulatory reorganization and Basel III
- Important reorganization of the financial regulatory authorities has been finalized.
- Basel III will be implemented starting in December 2021.
- Banking supervisory framework: found to be robust but needs further improvements in areas including consolidated supervision and some aspects of credit risk.

### Banking sector resilience and policy advice
- Banks remained profitable through the crisis, partially supported by:
  - Central bank financing.
  - Government-guaranteed SME lending.
- FSAP findings and recommendations:
  - The banking sector is sufficiently capitalized overall.
  - Banks should ensure continued resilience by transitioning to Basel III-compliant capital structures and completing announced capital raises.
  - Pandemic-related measures should be carefully withdrawn when appropriate.
  - Introduce a bank resolution mechanism and deposit insurance.
  - Implement a risk-based capital framework for insurers.

*IMF press release: IMF Executive Board Concludes Financial System Stability Assessment with Chile (Press Release No. 21/367), December 9, 2021.*

---


## References

- [Chile and the IMF](http://www.imf.org/external/country/CHL/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/12/09/pr21367-imf-executive-board-concludes-financial-system-stability-assessment-with-chile_