Description

This paper presents some evidence on the current state of the banking system in Chile, with particular focus on the adjustments it must undergo to comply with the Basel II Capital Accord. We present some basic facts about the Chilean banking system and a brief international comparison. We consider separately local banks, the publicly owned bank and foreign banks, and present the evolution of some basic indicators of performance. The evidence shows some important efficiency gains over time. We also examine issues like the changing procyclicality of banks’ lending and the changes in capital requirements after the adoption of Basel II. The Chilean banking system is well prepared to implement Basel II, albeit in a gradual way.