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Title II: Supervision and Administration

Subtitle One: The Board

Section 6. The supervision and administration of the Bank shall be vested in the Board of the Central Bank, which shall be responsible for the exercise of the authority and the carrying out of the duties entrusted to the Bank by law. Whenever the expression “Board” is herein used, it shall be understood to mean the body to which this Section refers.

When passing its resolutions, the Board shall consider the general orientation of the Government’s economic policies.

Section 7. The Board shall be composed of five Members appointed by the President of the Republic, with the prior approval of the Senate, by means of an executive decree issued through the Ministry of Finance.

Section 8. The Board Members shall remain in office for a term of ten years and their appointments may be renewed. Replacement shall be in a staggered fashion every two years. The Chairman of the Board, who shall also be the Governor of the Bank, shall be appointed by the President of the Republic from among the Board Members for a five year term or until the expiration of such Member's term in office, whichever comes first. His appointment may be renewed.

Section 9. The Board shall elect from its Members the person who shall be the Vice-Governor of the Board and Vice-Governor of the Bank. The Vice-Governor shall remain in office for a term established by the Board or until the expiration of his term in office, whichever comes first. His appointment as such may both be renewed and revoked by the Board.

Section 10. Compensation for the Governor, the Vice-Governor and the Board Members shall be set forth by the President of the Republic for periods not to exceed two years. For such purposes, the President of the Republic shall appoint, with the anticipation as may be necessary, a Committee formed by three persons who are former Governors and Vice-Governors of the Bank, who shall present a compensation proposal based upon the salaries being paid by the private sector banking institutions to their top executives.

Section 11. The Board shall meet with at least three of its Members attending and its resolutions shall be deemed adopted with a favorable vote of the majority of the attending members, unless a qualified majority is required by this Act. In the event of a tie, the Member presiding shall have the casting vote. The Board shall hold ordinary meetings at least once a week, and extraordinary meetings whenever specifically convened by its Governor either at his own initiative or at the written request of at least two Members. Upon such a request, the Governor shall not refuse to convoke the meeting and the respective session shall take place within the three banking days following the request to which this subparagraph refers. With the favorable vote of at least three of its Members, the Board shall issue the internal regulations necessary for both its appropriate functioning as well as that of the Bank. The amendment of the regulations shall be made also with the favorable vote of three of its Members. All resolutions adopted by the Board shall be recorded in the minutes of the respective session.

Section 12. In the event of vacancy, absence or incapacity to perform his duties, the Governor shall be substituted by the Vice-Governor and, in the absence of the latter, by the Member who comes next in order as established by the Board. If said order has not been established, the substitution shall be made by the members in order of seniority. Should a position of Board Member become vacant, the appointment of a new Member shall be made in the manner indicated in Section 7, his term being only the remaining term of the substituted member. Should the position of the Governor become vacant, the appointment of a new Governor shall take place in accordance with Section 8 for the corresponding term as established by the second paragraph of that Section. Should the position of Vicegovernor become vacant, the Board shall make the corresponding appointment in accordance with the provisions of Section 9.

Section 13. The Members of the Board shall be precluded from intervening or voting on resolutions concerning credit transactions, investments or other business in which he, his spouse, or his relatives up to the third degree of consanguinity or second degree of affinity, both inclusive, may have an interest of a commercial nature. The prohibitions of this Section shall not apply with regard to resolutions intended to produce effects of general applicability. In the event that any of the above situations should arise, the Member concerned shall not count for purposes of determining the respective quorum.

Section 14. The position of Board Member shall not be compatible with any position or service rendered in the private sector, whether or not for compensation. However,Board Members shall be entitled to perform duties either in public or private non-profit institutions and foundations, provided no compensation is derived therefrom. The position of Board Member shall similarly not be compatible with any position or service paid out of state or municipal resources or with duties, whether or not paid, as Board Member, director or employee of directly or indirectly controlled state-owned institutions, state owned autonomous entities, state enterprises and, generally, any public agency created by law, as well as enterprises, corporations or institutions, either public or private, whereby the state, its enterprises, corporations or institutions whether or not under its centralized management, may have equal or majority control capital investments or, in the same proportion, representation or participation. Likewise, said office shall be incompatible with the participation in the ownership of banking enterprises and financial companies. For the purposes of this incompatibility, if the Board Member were married under the marital community regime, the holdings of the spouse shall also be considered, with the exception of those acquired with funds pertaining to its personal net worth in accordance with the provisions of Section 150 of the Civil Code; as well as those of minor children under paternal custody of those persons and of the companies in which any of them may have a participation in the capacity as controller. Should the Board Member, his (her) spouse or minor children under paternal custody acquire said participation through inheritance or other gratuitous manner, those shares must be disposed of within the period of 30 days counted from the date in which that disposal may be effected (1).

The incompatibilities established under this Section shall not apply to professorships or academic duties. They shall similarly not apply whenever the laws require that a Board Member must sit on a specific council or board of directors, in which case they will not be entitled to any payment whatsoever for the performance of those other duties.

The Board Members, prior taking office, shall have to state under oath and by means of an instrument filed with a notarial office of the domicile of the Bank, an account of their patrimonial situation, the professional and economic activities in which they participate and the circumstance of not being affected by the incompatibilities indicated above. The sworn statement shall have to be effected in the terms indicated above, with the same formalities, at the time they leave office. Without prejudice to what was pointed out in Section 90, in this case, Sections 60B, 60C and 60D and the second paragraph of Section 61 of Law 18,575, Organic Constitutional Act on the General Basis for the Administration of the State, shall be applicable, acting the Vice-Governor of the Bank as certifying officer and depositary, who shall provide copy to whoever requests it at the expense of the petitioner. (2-3).

Article 14 bis No person dependent on illegal narcotic drugs or substances shall occupy the position of Council member, unless that person justifies such consumption is for the purpose of medical treatment. Prior to taking office, the Council member shall file a sworn declaration that (s) he is not affected by this incompatibility. (4)

Section 15. In the event that any of the Board Members infringes the provisions of Section 13 hereof or behaves in a manner that constitutes an abuse of his capacity as such with the purpose of obtaining direct or indirect benefits for himself or for third parties, an accusation may be brought against him to the Court of Appeals of Santiago, which shall render its decision through one of its chambers and in final instance as to whether such infringement or abuse has actually been incurred. The Court may ordain such measures as it may deem appropriate in order to become better acquainted with the facts of the case.

Same accusation may be filed against the Board Members who include inaccurate information or without justification omit material information in the statement required in accordance with the provisions of the final paragraph of Section 14 (5).

The accusation, which shall be justified and filed by the President of the Republic or by the Chairman of the Bank or by at least two Council members, shall be given priority for its study and decision and the sentence shall be passed upon within the period of thirty working days counting from the date in which hearings were conducted.

While the decision is pending, the Court shall have the authority to issue an injunction temporarily restraining the Member accused from the exercise of his duties within the Board.

Once the judgment declaring the occurrence of the infringement or abuse has become definitive, the concerned Board Member shall cease immediately in his duties, and the Court of Appeals shall remit the proceedings to the appropriate court for the initiation of the corresponding civil or criminal actions. The Board Member ceasing in his duties pursuant to the provisions of this Section may not be appointed again in the same capacity.

Section 16. The President of the Republic may remove the Board Member acting as Governor of the Board andGovernor of the Bank upon a justified request of at least three of its members on the grounds of non-compliance with the policies adopted or the regulations issued by the Board. The President of the Republic shall proceed with the above mentioned removal with the prior approval of the Senate, which shall be requested within the thirty day period counting from the date of the request referred to in the preceding paragraph. Should the removal be approved by the Senate, the President of the Republic shall make a new appointment in accordance with the provisions of Sections 7 and 8 of this Act, for the balance of the term of the member so dismissed. The person being removed from the position of Governor of the Board and from office in the capacity as Board Member pursuant to the provisions of this Section may not be appointed again as such during ten years following dismissal.

Section 17. The President of the Republic by justified reason and the prior approval of the Senate may remove any or all of the Board Members. The dismissal may only be based upon the grounds that the concerned Board Member has voted in favor of Bank resolutions representing a material and clear breach of the purposes of the Bank as specified in the first paragraph of Section 3, and provided that said resolution has been the main and direct cause of a material damage to the economy of the country.

The Board Member or Members concerned shall have the right of a hearing before the Senate.

The person being removed from office as Board Member pursuant to the provisions of this Section may not be appointed again as such during a term of ten years following dismissal.

Section 18. The Board shall be responsible for the following:

 

1. Exercise the authority and perform the duties entrusted to the Bank by law;

2. Establish the general policies of the Bank, issuing the regulations of general applicability to which the Bank shall conform its transactions, and exercising the supervision and control of same. In order to accomplish the latter, the Board shall appraise the compliance with the policies and regulations of general applicability issued and the performance of the transactions and activities of the Bank;

3. Approve the internal regulations for the staff of the Bank, determine the administrative and personnel structures of the Bank, set the compensation and any other allowances or benefits to the staff members of the Bank;

4. Appoint, accept resignations and terminate the working contracts of the General Manager, the General Counsel and the General Auditor of the Bank where by the majority vote of all Board Member shall be required;

5. Appoint the person who shall substitute for the General Manager, the General Counsel and the General Auditor of the Bank in the event that, due to absence, vacancy or any other reason, they may be prevented from performing their office. No evidence of the reason for substitution shall be necessary to be given to third parties;

6. Appoint, accept resignations and terminate the working contracts of persons who, in accordance with the Internal Regulations for the Staff of the Bank, may have the rank of higher employees and of persons whose duties include authenticating the acts of the Board and of the Bank and who need to be a lawyer and whose appointment needs to be published in the Official Gazette;

7. Open or close agencies, offices or branches within the country or abroad;

8. Determine the days which will be the working days of the Bank and the hours in which the bank will be open for business to the public, both of which shall be published in the Official Gazette;

9. Approve or reject every year the financial statements of the Bank and decide upon the write offs and reserves as may be appropriate;

10. Delegate certain administrative and operational authority upon the Governor, the Vice-Governor, a Board Member, the General Manager, the General Counsel and other Bank officials and, in specific cases, grant special powers to third parties, establishing the compensation to be paid to the latter.

Section 19. The Minister of Finance shall have the right to attend theBoard meetings, with the right to be heard. The Minister shall be normally informed in advance and in writing of all Board meetings convened, as well as of the agenda.

During any meeting attended, the Minister may suggest to the Board either orally or in writing, the adoption of specific resolutions which the Board shall deal with at the following meeting. To this end, the Board shall include such proposals on the agenda of such following meeting.

At any meeting attended, the Minister shall have the right to suspend the applicability of any decision or resolution passed by the Board for a period not to exceed 15 days, counting from the date of such meeting, provided that, if all Board Members insist upon the application thereof, such suspension shall have no effect. In the event of suspension of applicability of any Board decision or resolution pursuant to the above provisions, the Minister may request the Governor of the Bank, with sufficient anticipation and while the suspension period is still in effect, to convoke an extraordinary meeting of theBoard to deal with the matter that is the subject of the suspension measure, which theGovernor may not refuse to convoke and which shall take place within three business days following the request referred to above.

In the absence of the Minister of Finance, Board meetings may be attended by the Undersecretary of Finance for the purpose of informing the Minister of the matters been disposed of.

Section 20.The Board shall have the authority to hold meetings and adopt valid decisions, regulations and resolutions in places other than the domicile of the Bank, provided they are situated within the territory of the Republic. In such event, the attendance of all of the Board Members shall be required. If such meeting is not attended by all of the Board Members, the fact that the absent Members were duly notified shall be recorded in the minutes thereof.

Section 21. Board Members shall be under no obligation to appear in court but in accordance with the provisions of Sections 361 and 389 of the Code of Civil Procedure and Sections 300 and 301 of the Code of Criminal Procedure (6).

Subtitle Two: The Governor, Vice-Governor, General Manager, General Counsel and General Auditor.

Section 22. TheGovernor shall be responsible for conducting the relations of the Bank with public authorities and with domestic, foreign, or international banking and financial institutions. Without prejudice to other responsibilities entrusted to him by law, his duties shall specifically be:

1. Carry out and enforce the regulations and resolutions adopted by the Board;

2. Preside over the Board meetings and convene the extraordinary meetings whenever appropriate;

3. Inform the Board at least once a month or at the request of any of its Members, about the enforcement of policies and regulations of general applicability issued by such body and give an account on the functioning and performance of the Bank. In addition, once a month he shall deliver a report to Board Members regarding the resolutions carried out or pending to be carried out;

4. Inform the President of the Republic and the Senate on the policies and regulations of general applicability issued by the Bank in the exercise of its duties in accordance with the provisions of Section 4;

5. Request, with the prior consent of the Senate, the participation of the State Prosecution Office in lawsuits involving a public interest in which the Bank is a party or has an interest;

6. Represent the Bank other than in court actions;

7. Supervise the execution of Board resolutions and carry out any other duties entrusted to him by the Board, being allowed to partially delegate the powers vested in him, subject to the approval of the Board.

Section 23. It shall be the duties of the Vice-Governor:

1. Substitute for theGovernor in the event of absence, vacancy or any other reason preventing the Governor from performing his office. No evidence of the reason for such substitution shall be necessary to be given to third parties. Substitution shall embrace all duties and powers of the Governor, including those duties and powers that have been delegated to him,

2. Serve as minister of oath and depositary of the statements referred to in the final paragraph of Section 14, and (7)

3. Carry out any other duties as may be entrusted to him by the Board.

Section 24. The General Manager shall be in charge of the direct management and supervision of the Bank, pursuant to authority granted and instructions issued by the Board. The following shall be his specific duties:

1. Carry out the acts of administration of the Bank, as well as any other acts entrusted to him by the Council;

2. Issue appropriate instructions, comments and recommendations to the several departments and personnel of the Bank necessary for the efficient management and the adequate conducting of its operations;

3. Attend Board meetings with the right to be heard;

4. Represent the Bank in court proceedings, with the powers granted him pursuant to the first paragraph of Section 7 of the Code of Civil Procedure, being the person upon whom service of process in lawsuits brought against the Bank has to be made in order for such a service to be valid.

5. Without prejudice to the above, the General Manager may grant powers of attorney to represent the Bank in court to other Bank officials or to third parties, with the powers granted by paragraph one of Section 7 of the Code of Civil Procedure, and agree on the compensations to be paid to the latter. The General Manager shall require the prior consent of the Board in order to abandon any action brought before the courts during the first instance, or to admit the complaint of the opponent, or to waive appeals or legal periods, settle, compromise, grant arbitrators the power to decide without having to follow rules of procedure, approve terms and conditions of payment and to collect. However, the Council may grant to other Bank officials or to third parties all or some of the powers above mentioned, to be exercised in specific lawsuits;

6. Perform all other duties as may be entrusted to him by the Board.

The incapacity referred to in Section 13 shall apply to the General Manager in its case. Likewise, there shall also apply to the General Manager the incompatibilities and obligations provided for in Section 14(8)

Section 25. The General Counsel shall be the head of the legal department and the supervisor of the members of its staff. He shall be especially in charge of:

1. Seeing that all the decisions, resolutions and contracts subscribed by the Bank comply with all the applicable current legal provisions. To this end, he shall acquaint himself with all such matters and shall make his observations known to the Board, for which purpose he shall attend the meetings thereof with the right to be heard;

2. Informing on legal matters submitted to his knowledge and, generally giving advice to the Board and the higher officials of the Bank and through the legal department, advise all the departments of the Bank in matters requiring a legal opinion;

3. Supervising the progress of legal proceedings to which the Bank is a party;

4. Exercising the authority and carrying out the duties entrusted to him by the Board.

Section 26. The control and internal supervision of the Bank's accounts, operations and administrative regulations shall be the responsibility of the General Auditor. The General Auditor shall report in writing to the President, with a copy to the Board, the comments and objections he may deem appropriate regarding the accounts and operations of the Bank.

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