The emerging economies, although they did not experience the same problems, must take advantage of this opportunity to review their own situation, to draw lessons about what worked well or not, and to advance in the task of perfecting their financial systems. Chile’s institutional arrangements as regards financial stability have generally worked well in recent decades. This is borne out by the present strength of its financial system and the way in which it came through the recent crisis without major problems. But there are pending tasks and challenges. Large financial reforms may not perhaps be required but there is room for improvements in various areas. They include the need to create a mechanism for coordination and communication at the highest level with a focus on financial stability in which the government, the BCCH and the different financial sector supervisors participate. This would allow the BCCH to make its points of view known formally to the relevant authorities. Similarly, in a context in which financial activities have become increasingly complex, the bodies responsible for supervision need to be strengthened institutionally. From this point of view, particular attention should be paid to the resources assigned to them and their capacity to issue norms and regulation in a world that calls for constant adjustments and changes. Finally, it would be advisable for the BCCH to have a more active role in defining prudential regulation. In some cases, this role already exists but could be extended to other norms with systemic implications.
An organic law in force since 1989 establishes that the BCCH’s objective is to “safeguard the stability of the currency and the normal functioning of domestic and external payments”. 1  See Table 1 at the end of this document. BIS Review 142/2010  1  The first part of this objective is interpreted as the maintenance of price stability or, in other words, low and stable inflation. For the past ten years, the BCCH has applied a policy framework with an inflation target of 3% and a 1% tolerance range. The second part of its objective is directly related to financial stability. For payments to be made normally, the banking system, money and credit markets and supporting infrastructure must all function properly. The reference to external payments seeks to highlight the importance that trade and financial flows with the rest of the world have for an open economy such as Chile. Financial stability is, in other words, an essential part of the BCCH’s responsibilities, very much in line with what we see in most of the world’s economies. In the eyes of BCCH, the two parts of its objective are different and separable, but affect and reinforce each other. The management of monetary policy, which seeks price stability, requires that money and financial markets work well while financial stability requires, among other conditions, that inflation remains low and stable. The recent financial crisis has underlined the interrelations between these two objectives.