Translation note: Originally published in Spanish in El Mercurio Legal, 15 February 2017. Translated into English by the author.
This article was written in February 2017, ahead of Chile's financial regulatory reform. The Comisión del Mercado Financiero (CMF) — which merged the SVS and SBIF along the lines proposed here — was established by Law 21,000 and became fully operational in June 2019. The two-tier supervisory structure advocated in this piece reflects the direction Chile subsequently took.
Chile was undertaking a gradual reform of its financial system — consolidating regulation ex-ante (supervisory structure, Basel III capital requirements) and ex-post (recovery and resolution) within a new General Banking Law. The model was the European regulatory modernisation of 2010–2014.
The European System of Financial Supervision (ESFS), established in 2010, offered a two-tier architecture: macro-prudential oversight by the ESRB, and micro-prudential supervision by three sectoral authorities (EBA, EIOPA, ESMA) communicating with national supervisors.
Dr. Pollak proposed a Chilean System of Financial Supervision with two analogous tiers — a macro level led by the Central Bank President alongside the heads of SBIF, SVS and SP; and a micro level integrating their respective boards — explicitly including the Pension Superintendency (SP).
Chile was undergoing a gradual process of reform to its financial system. That process aimed to establish a consolidated regulatory framework operating both ex-ante — through a supervisory structure for the financial system's component bodies, and through minimum capital requirements aligned with the international standard set out in Basel III — and ex-post, through a recovery and resolution regime for financial institutions. All of this was to be embedded in a new General Banking Law (Ley General de Bancos, LGB). In these respects, Chile sought to replicate the regulatory modernisation that Europe had undertaken between 2010 and 2014 — a fact that was widely acknowledged, not least because it meant incorporating three entirely distinct regulatory frameworks into what would be a single piece of legislation.
Beyond the legal structure in which Chile chose to embed these changes, the market was looking positively at the prospect of a new architecture for the Chilean financial supervisory system. In that context, the proposed creation of a Comisión del Mercado Financiero — which would bring together the Superintendencia de Valores y Seguros (SVS) and the Superintendencia de Bancos e Instituciones Financieras (SBIF) — represented a significant step forward in Chilean legislation. In this context, it was particularly worthwhile for Chile to examine the European System of Financial Supervision (ESFS), adopted in 2010 through Regulations (EU) 1092/2010, 1093/2010, 1094/2010, and 1095/2010.
A decentralised body combining macro- and micro-prudential supervision of the financial system as a whole. Central to its design is the continuous exchange of information, recommendations and warnings between the two levels. Macro-prudential oversight is carried out by the European Systemic Risk Board (ESRB) — comprising the ECB Governing Council, the chairs of EBA, EIOPA and ESMA, and the European Commission. Micro-prudential supervision operates through three sectoral authorities: EBA (banking), EIOPA (insurance and pensions), and ESMA (securities and markets), each communicating with their respective national supervisors.
Drawing on this structure, Chile could consider the incorporation of two analogous supervisory tiers. The macro level could be composed of: (i) the President of the Central Bank; and (ii) the Presidents of the SBIF, SVS and Superintendencia de Pensiones (SP). The micro level could be composed of: (i) the Board of the Central Bank; (ii) the Board of the SBIF; (iii) the Board of the SVS; and (iv) the Board of the SP — which would naturally require structural changes to the last three institutions, none of which currently operated with a board structure.
"In this new century, where the financial system cuts across every sector of society, it is essential that our institutions adapt — combining independence, communication, and decision-making at the same level."— Dr. Verónica Pollak, El Mercurio Legal, February 2017
This structure would give rise to the Chilean System of Financial Supervision. What stands out in this new architecture is not only the two supervisory tiers, but also the explicit inclusion of both the Central Bank and the Superintendencia de Pensiones. The latter's inclusion is essential: the financial system has a direct and immediate impact on Chile's pension system, and any supervisory architecture that omits it is incomplete by design.
Under the supervisory architecture proposed in this article — developed in consideration of the European regulations cited — the draft new General Banking Law as it then stood committed, broadly speaking, two significant omissions: first, it omitted a two-tier supervisory structure; and second, it omitted the Superintendencia de Pensiones entirely. Opening that discussion would be a very positive step.
"The draft General Banking Law committed two significant omissions: a double tier of supervision, and the Superintendencia de Pensiones."— Dr. Verónica Pollak, El Mercurio Legal, February 2017
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