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International Monetary Fund. Monetary and Capital Markets Department and International Monetary Fund. Legal Dept.
This Technical Assistance Report paper on Chile advices on the planned integration of the superintendency for banking supervision, Superintendencia de Bancos y Instituciones Financieras (SBIF), into the Comisión para el Mercado Financiero (CMF). While the approved Bills contain important enhancements to the governance and regulatory framework, several legal aspects would benefit from further clarification. These include aspects related to the mandate, objectives, powers, and governance of the CMF. This report discusses the mission’s main observations and recommendations regarding the integration of the SBIF into the CMF. The report also provides an overview of the existing supervisory architecture and discusses the legal mandate, objectives, and powers of the new CMF, followed by a discussion on the governance arrangements that existed prior to the integration and of the main changes brought in the Law recently approved. It also discusses a possible blueprint for the organizational structure of the new CMF aimed at realizing the desired synergies in the supervision function and strengthening conglomerate supervision.
International Monetary Fund. Western Hemisphere Dept.
This 2016 Article IV Consultation highlights that GDP growth in Chile has been weak, with activity slowing in October. However, conditions are in place for the economy to recover. After expanding by a moderate 1.7 percent in 2016, growth is forecast to increase to 2 percent in 2017. Faster growth in main regional partners and more stable copper prices are expected to lift exports and investment. The recovery is, however, projected to be gradual, held back by slow wage and job growth and still low business confidence. The financial sector appears healthy. Banks’ profitability is declining, but capital buffers are adequate and nonperforming loan rates are low.
Mr. Luc Laeven
Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature.
International Monetary Fund. Western Hemisphere Dept.
KEY ISSUES Politics: President Bachelet won the Presidential election on a platform to foster inclusive growth and reduce inequality. Her government took office in March 2014 and is launching an ambitious policy agenda that includes important reforms in several areas, including taxation, education, productivity, and energy. Outlook and risks: Chile’s global environment is shifting, with a dimmer outlook for its main export, copper, and normalization of global monetary conditions. Growth has slowed markedly, resulting in a modest output gap. The peso has depreciated, feeding into inflation. Staff projects growth to bottom out in 2014 and then gradually recover. Key risks relate to a large and lasting drop in copper prices and global financial volatility. Policy mix: The freely floating peso is working as a shock absorber and will support the economic recovery. The policy mix with broadly neutral fiscal and accommodative monetary policy is appropriate. Room for further monetary easing has narrowed but space remains if domestic demand flounders, so long as inflation expectations remain well anchored. On fiscal, given the strong public finances, automatic stabilizers should be allowed to operate unimpeded and there is space for stimuli in the event of a major downturn. The commitment to close the structural fiscal deficit by 2018 is appropriate and should be phased in a way that avoids undue drag on the recovery. Should risks materialize, the freely floating currency is the first line of defense. Growth and equity reforms: Achieving strong growth while reducing inequality will require structural reforms. The authorities’ agenda focuses on the right areas but many details remain work in progress. Clarity on the details, timetables, and prioritization will reduce uncertainty and the risk of delays. Financial stability: Risks to financial stability appear contained, but it will be important to push through with regulatory reforms underway, including initiatives currently in Congress. Further effort will be needed to close regulatory gaps, in particular bank capital requirements, relative to international benchmarks.
International Monetary Fund
This technical paper focuses on the challenges faced by Paraguay’s budget resources. Paraguay’s government should adopt a forward-looking fiscal strategy. The strategy’s main goals should be to contain budget dependence on Itaipu revenues, preserve fiscal discipline, and allow for the gradual and sustainable transformation of the envisaged, yet temporary, windfall into other forms of financial, physical, and human capital. The creation of a special fund could help mobilize public support for saving part of the windfall and building a buffer for the future.
Mr. Robert Rennhack
The Latin America and Caribbean (LAC) region has weathered the global financial crisis reasonably well so far, although tighter global financial conditions began to take their toll on trade, capital flows and economic growth in late 2008. This resilience reflects the reforms put in place by many countries over the past decade to strengthen financial supervision and adopt sound macroeconomic policies. Building on this progress, the region’s financial sector reform agenda now aims at further improvements, including steps aiming to improve compliance with the Basel Core Principles of Banking Supervision and to broaden and deepen domestic financial markets.
Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Les décideurs rechignent souvent à accorder l’indépendance aux agences qui réglementent et supervisent le secteur financier, car ils craignent que ces agences, avec leurs responsabilités et leurs pouvoirs étendus, puissent imposer leur loi. Cette brochure décrit les mécanismes permettant de garantir que ces agences soient redevables non seulement envers l'État, mais également envers le secteur qu'elles supervisent et envers le grand public, et propose des exemples de divers pays.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Las autoridades de política económica suelen ser renuentes a otorgar independencia a los organismos que regulan y supervisan el sector financiero debido al temor de que estos organismos, con responsabilidades y poderes de amplio alcance, puedan convertirse en una fuente normativa por sí mismos. Este folleto describe los mecanismos para que los organismos reguladores rindan cuentas no solo ante el gobierno sino también ante la industria que supervisan y el público en general, con ejemplos sobre una amplia gama de países.