Chile capital markets chief outlines objectives amid financial hub push

Financial development boosts the resilience and economic growth of a country. But in parallel, as a financial sector expands and plays an increasingly important role in the GDP mix, policymakers and regulatory authorities must have the right measures in place to ensure system stability.

That is the case in Chile, where wheels are in motion to support government plans to convert the country into an international financial hub and ensure the requisite associated safeguard mechanisms are installed.

That was among the key takeaways from a press workshop hosted by local bank Itaú, where the finance ministry’s capital markets coordinator, Catherine Tornel, outlined the government’s four main objectives in the area of capital markets.

These, Tornel said in a presentation, are the development and internationalization of the capital markets, ensuring financial stability, enhancing protection of market participants and easing access to financing, particularly for SMEs.

In terms of size, Chile’s capital market is bigger than Mexico’s, Peru’s and Colombia’s and largely on a par with that of Norway and Thailand.

“The size of [Chile’s] financial sector is very significant when compared with the rest of the economy, other activities in general,” Tornel (pictured) said. “We must try to develop, as quickly as possible, the financial sector while constantly taking care of financial stability."

LEGISLATION

The portfolio of legislative changes lawmakers are working on encompasses the capital markets, banking, fintech and insurance sectors.

In the banking space, congress has passed a law to bring the country’s solvency rules and regulations in line with Basel III, a move that should boost the sector’s attractiveness to potential investors. Chile currently is Basel I compliant.

Authorities are also working on an associated cybersecurity bill to beef up the defenses of the financial services sector. The government has sought advice from the IMF. 

A data protection bill, which gives an individual control over how their personal data is used and brings Chile’s framework in line with international standards, is also in congress.

In the insurance space, lawmakers last year dusted off draft legislation to shift to a risk-based supervision model. This would give insurers more freedom in terms of investment options but also require them to have the corresponding capital safeguards in place.

Congress is also debating a bill concerning stock exchange interconnection mechanisms and transparency, while earlier this year lawmakers passed a bill that overhauls commodity exchange rules, with the central aim being to help SMEs – key job generators – obtain financing at favorable rates.

In parallel, lawmakers are preparing a bill to regulate crowdlending and cryptocurrency platforms.

On this, Tornel said it was important to have a regulatory framework in place to provide legal certainty and attract increased investment into the segments, as part of the wider push to expand Chile’s financial services sector.

“Every country in the world is advancing in this area,” said Tornel. “Fintechs have a space to make an important contribution to the innovation of the markets, competition and financial inclusion.

“We believe these three things are fundamental to achieve development and to be able to continue making the market more international and, as well, more interesting to foreign investors.”

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