The Central Bank of Chile published its Financial Stability Report for the first half of 2025, setting out the Board’s assessment of key risks, vulnerabilities and mitigants for Chile’s financial stability. The report emphasises that it is a risk assessment rather than a forecast, and identifies a marked increase in global economic uncertainty as the main source of risk for Chile, even as financial markets have so far absorbed recent events without major disruption. In its first-half Financial Policy Meeting, the Board agreed to keep the Countercyclical Capital Requirement (RCC) at 0.5% of risk-weighted assets. Against a deteriorating global backdrop that includes high public and private debt, elevated long-term rates, concerns around sectors of China’s economy and geopolitical conflicts, the report notes that emerging markets, including Chile, have performed better than expected under comparable uncertainty, with slightly lower sovereign spreads and rates, currency appreciation against the US dollar and positive equity returns versus early April. Domestically, it highlights progress in correcting prior macroeconomic imbalances through a smaller current account deficit and higher saving alongside improved household and corporate incomes, while pointing to inflation still being high but consistent with the convergence outlook in the March Monetary Policy Report. Credit performance has improved overall, with lower consumer loan non-performance, stabilisation in mortgages and declining (though still historically high) commercial delinquency, but vulnerabilities remain concentrated among smaller firms and pandemic-era Fogape borrowers; the residential real estate sector also remains weak due to high mortgage rates and a large stock of completed homes, albeit with early positive signs at the margin. On fiscal conditions, the report notes that persistent structural deficits have reduced fiscal space and raised public debt, which official projections place slightly below the 45% of GDP level defined as prudent in the near term, while warning of risks that could push debt above that threshold in coming years. Stress-testing results indicate that, after severe shocks, households’ and firms’ debt-at-risk is lower than in recent quarters, and that the banking system remains solvent under a severe scenario involving a sharp activity contraction, higher funding costs and tighter financial conditions, supported by provisions, liquidity buffers and stronger capital as banks continue adapting to Basel III implementation. The report also notes that Chile’s financial system is not immune to global shocks and links resilience to efforts to deepen local financial markets, and it includes thematic boxes on mortgage portfolio payment performance, banks’ exposure to foreign trade with the United States in the context of tariffs, and International Monetary Fund technical assistance recommendations on strengthening systemic liquidity management.

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