The Central Bank of Chile published its Financial Stability Report for the second half of 2025, highlighting an increase in vulnerabilities linked to international financial markets and identifying the external environment and a potential abrupt tightening in global financial conditions as the main risk to Chile’s financial stability. In its Financial Policy Meeting for the second half of the year, the Board agreed to keep the Countercyclical Capital Requirement at 0.5% of risk-weighted assets. The report notes buoyant risk appetite in advanced economies, especially the United States, alongside elevated uncertainty from trade, geopolitical and institutional tensions, and warns that persistently high global sovereign debt and expectations of sustained fiscal deficits could strain sovereign debt market functioning. Domestically, it describes a modest improvement in financial conditions versus May, with slightly lower long-term rates, narrower sovereign and corporate spreads, more dynamic bond issuance, higher equity prices and increased capital inflows; household vulnerabilities remain low and corporate leverage, debt service and arrears indicators have improved, while real estate remains weak despite some support linked to state guarantees and subsidies. The banking system is assessed as having capital and liquidity buffers consistent with remaining solvent under a severe stress scenario, supported by additional capital from perpetual bonds and regulatory buffers, while the Bank also warns that persistent structural fiscal deficits have reduced fiscal space and increased public debt, reinforcing the need for caution in fiscal accounts to preserve financing conditions. On policy development, the report states that during 2025 Chile advanced the consolidation of key Basel III capital requirements in line with international standards and that two proposals were put to public consultation: one to allow recognition of master agreements for repurchase transactions, and another to strengthen central counterparty liquidity management by aligning the treatment of cash held at the Central Bank with other liquidity deposits.
Central Bank of Chile 2025-11-12
Central Bank of Chile keeps the countercyclical capital buffer at 0.5% and flags rising exposure to international financial market risks
The Central Bank of Chile's Financial Stability Report for H2 2025 highlights increased vulnerabilities from international financial markets, with external risks and potential global financial tightening threatening Chile's stability. The Board maintained the Countercyclical Capital Requirement at 0.5% of risk-weighted assets. The report also notes progress in Basel III capital requirements and public consultations on repurchase transaction agreements and central counterparty liquidity management.