Rosanna Costa: Presentation of the Financial Stability Report Second Half 2024

Presentation by Ms Rosanna Costa, Governor of the Central Bank of Chile, of Central Bank of Chile's Financial Stability Report Second Half 2024 before the Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 20 November 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Mr. President of the Finance Commission, senator Felipe Kast, senators members of this Commission.

As is customary in May and November, we are here to present the vision of the Board of the Central Bank of Chile on recent developments in the financial sector and their implications for financial stability, which are detailed in the Financial Stability Report (IEF) that we published this morning.

On Monday and Tuesday of this week we held our Financial Policy Meeting, at which time the Board of the Central Bank decided to hold the Countercyclical Capital Requirement (CCyB) for the banking system at a level of 0.5% of risk-weighted assets (RWAs). This requirement is a precautionary macroprudential measure aimed at strengthening the resilience of the banking system, particularly so that the provision of credit is not affected at times when the economy could suffer a major economic shock.

The IEF is part of the mandate to ensure the normal functioning of internal and external payments granted to us by law. Its objective is to analyze the vulnerabilities, potential risks and mitigators of our financial system and its capacity to absorb severe shocks. It is therefore a report that, unlike the Monetary Policy Report (IPoM), does not contain projection scenarios, but rather focuses on risk scenarios that, although less probable, are possible.

In this IEF we highlight that the external scenario continues to be the main source of risk for local financial stability. Although the cycle of monetary normalization policy has begun in the United States, uncertainty associated with global geopolitical tensions and the scope and impact of potential economic and trade policies on the American economy has increased. In addition, some sources of risk persist at the global level, such as the high valuation of financial assets, the persistence of high long-term interest rates and the high sovereign and corporate debt.