Functions of the Central Bank of Chile

The profound political and economic structural changes that have occurred since the Central Bank was created, both in Chile and abroad, have tended to support the greater and more effective autonomy of the Central Bank, particularly in recent years. The need for an autonomous central bank is based on the stability inherent in monetary and foreign exchange policies that are more independent of political cycles. These policies must take into consideration both the general orientation of economic policy and the mechanisms most suited to coordinating and exchanging information with the authorities involved in the executive branch of government.

In this context, Article 108 of Chapter XIII of the current Constitution of Chile granted the autonomous Central Bank constitutional rank. At the same time, this law defined it as a body with its own equity, of a technical nature, whose composition, organization, functions and attributes should be determined through a basic constitutional law of its own.

Nonetheless, legislators also established a constitutional rule, contained in Article 109 of the Constitution, that this institution could only carry out operations with public and private financial bodies. The Central Bank cannot guarantee nor acquire documents issued by the State, its bodies or companies. Nor can it adopt agreements that involve discrimination or the establishment of rules and requirements that differentiate among persons, institutions or bodies carrying out operations of the same nature, nor can it directly or indirectly finance any public expenditure or loan, except in the case of external war or danger thereof, which must be so qualified by the National Security Council.

In line with the above, on 10 October 1989, Law 18,840 came into effect. Its first article established the text of the basic constitutional law of the Central Bank of Chile.

Essentially, along with confirming the Bank's independence in technical and financial (equity) terms, this law also defined the objectives to be pursued by this institution: to ensure the stability of the value of the national currency and the normal functioning of domestic and foreign payments. To achieve these objectives, a suitable macroeconomic balance must be maintained within the formulation of all policies to be projected in time.

With regard to the technical nature of the Central Bank's autonomy, this referred essentially to its ability to establish its own agreements and make its own technical decisions while exercising its attributes. Similarly, from the point of view of equity, the Central Bank is also autonomous, since the law granted it its own equity, which can be managed completely independently of the executive branch.

As a result of the autonomy granted by law, the Central Bank is not subject to supervision by the General Comptroller of the Republic nor the Superintendent of Banks and Financial Institutions. Nor does it form part of the state administration and it is governed exclusively by its own rules, included in its basic constitutional law and some specific clauses included in the general banking law, and it also enjoys sole faculty for the administrative interpretation of its decisions, regulations, orders or instructions, notwithstanding the legal attributes of judicial bodies.