Chile: Technical Assistance Report-Strengthening Systemic Liquidity Management
Technical Assistance Reports, May 7, 2025
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Bibliographic details
- Published: May 7, 2025
- Series: Technical Assistance Reports
- DOI: https://doi.org/10.5089/9798229009126.019
Executive summary
- Evaluates four key areas impacting the efficiency and resilience of Chile's financial sector: central bank collateral policy, emergency liquidity assistance (ELA), systemwide market support programs, and repo market development.
- Recommends targeted reforms and coordination to strengthen preparedness, decision-making, and market functioning.
- Notes effective BCCh operations during social unrest and the COVID-19 pandemic of 2019–20 to stabilize core markets.
Central bank collateral policy
- Introduce a collateral framework with:
- eligibility criteria,
- valuation procedures,
- risk mitigation measures.
- Differentiate collateral practices for:
- monetary policy operations, and
- ELA/systemwide support.
Emergency Liquidity Assistance (ELA) framework and internal preparedness
- Establish an ELA framework that includes:
- internal procedures,
- transparency measures.
- Create an internal ELA Working Group to standardize and ensure preparedness and efficient decision-making by developing:
- a request letter,
- an ELA master agreement,
- funding templates.
- Develop ELA policy parameters, including:
- duration,
- interest rate,
- potential conditionality.
Institutional coordination and crisis governance
- BCCh, CMF, and MoF should establish a Crisis Management Group to ensure clarity about their respective roles.
Systemwide market support programs: design principles
- Future programs should adhere to key principles:
- use discretionary intervention triggers based on market indicators,
- price operations to encourage initial take-up and facilitate exit,
- prefer temporary operations to limit risks,
- ensure transparency to promote effectiveness and accountability.
Repo market development: constraints and strategy
- Identifies legal, regulatory, taxation, accounting, and infrastructure issues constraining repo market activity.
- Issues span multiple government agencies and the private sector.
- BCCh should coordinate with relevant stakeholders to formulate a comprehensive medium-term market development strategy to address these challenges.
Historical experience informing recommendations
- During the social unrest and COVID-19 pandemic of 2019–20, the BCCh implemented effective measures to stabilize core markets—lessons from these episodes inform recommended frameworks and principles.
Publication and key statistics
- Pages: 61
- Volume: 2025
- Issue: 048
- Series: Technical Assistance Report No. 2025/048
- Stock No: TAREA2025048
- DOI: https://doi.org/10.5089/9798229009126.019
- ISBN: 9798229009126
- ISSN: 3005-4575
International Monetary Fund. Monetary and Capital Markets Department "Chile: Technical Assistance Report-Strengthening Systemic Liquidity Management", Technical Assistance Reports 2025, 048 (2025).
Content in this bundle
- Preface — Mission, context, and sector snapshot