The Bank and Its Internal Governance

 

The Central Bank of Chile was founded on August 22, 1925, during the government of Arturo Alessandri Palma. As of October 10, 1989, the Central Bank of Chile has been an autonomous technical body charged with ensuring the stability of the currency, that is, keeping the rate of inflation low and stable over time. It also promotes the stability and efficiency of the financial system, guaranteeing the normal functioning of internal and external payments.

These objectives enable the creation of a predictable environment for decision-making, thereby contributing to smoothing economic cycles and laying the foundations for the country’s sustained growth.

In order to meet its objectives, the Bank —among other duties— ought to regulate the amount of money in circulation and credit in the economy, so that they are sufficient for individuals, companies and institutions to carry out their transactions.

 

Since 1989, the Bank has been governed by an organic law of constitutional rank, namely Law No. 18.840. In the thirty years elapsed under the current legal framework, inflation has remained low and stable for the most part, thus contributing to the country’s development and the improvement of its citizens’ living standards.

The Constitutional Organic Law establishes the mechanism for the direction and management of the Central Bank, based on a superior instance, the Board, led by its Governor.

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The Board has five members, each of them appointed for a period of 10 years by the President of the Republic by means of a Supreme Decree, which must be ratified by simple majority in the Senate. Once their appointment has been thus ratified, they may become Board members and be in office for a period of 10 years.

The Governor of the Bank is directly appointed by the President of the Republic, and must always be one of the five members of the Board. The Governor’s term of office is five years or their time remaining as Board members. Besides chairing the Board, the Governor is in charge of the Bank’s out-of-court representation and its institutional relations with public authorities, financial institutions and international organizations.

For further information about the Board’s functioning, read the following documents:

The Bank also has a Senior Management, composed of the General Manager, General Counsel and General Auditor, in addition to seven Division Directors, who oversee 22 Area Managers.

Committees and Panels

Committee on Audit and Compliance

It is an advisory body in matters of supervision and superior inspection. As such, it fulfills the functions of reporting on the effectiveness of the institution’s internal control systems and procedures; analyzing their effects on its assets and reputation; assessing the reliability, integrity and timeliness of information delivery concerning financial statements; taking cognizance of the Annual Audit Plan and its compliance; and proposing the recruitment of external auditors.

Committee Members:

  • Ramiro Mendoza Zúñiga (since 2018).
  • Anthony Dawes Martindale (since 2017).
  • Ricardo Budinich Diez (since 2018).

Committee on Information Technologies

This Committee advises the Board of the Central Bank of Chile and its General Manager on matters of corporate governance of information technologies (IT), such as the definition of guidelines for IT strategic planning; validation of strategic initiatives in this area; identification of risk mitigators and review of costs and benefits of IT-related initiatives.

Committee Members:

  • Alejandro Hevia Angulo, Chair (since 2017).
  • Gonzalo Acuña Leiva (since 2018).
  • José Benguria Donoso (since 2019).

 

Panel of Experts

In December 2018, the Board appointed five economists to the Panel of Experts that will assess the Bank’s performance in complying with the two mandates of its Organic Law, namely price and financial stability.

The panel is chaired by Karnit Flug, former governor of the Bank of Israel, and by Professors Petra Geraats, University of Cambridge, England; Guillermo Calvo, Columbia University, United States; Enrique Mendoza, University of Pennsylvania, United States; and Donald Kohn, senior researcher at the Brookings Institution, who also served as vice president of the United States Federal Reserve.

Internal Control Structure

General Auditor’s Office

The General Auditor’s Office carries out activities aimed at assisting the Board, Management and the Audit and Compliance Committee, in accordance with the mandate given to the General Auditor by the Constitutional Organic Law of the Central Bank. Through consulting and underwriting activities, it performs independent, objective and systematic assessments of the design and effectiveness of the risk management system, governance, internal control and management.

General Counsel’s Office

The Bank’s General Counsel’s Office is responsible for overseeing the legality of the institution’s agreements, resolutions and contracts and for providing legal advice to the Board and the Bank’s various units, with the specialized support of its legal and regulatory services areas.

Risk Management

In 2018, the Corporate Risk Area, responsible for identifying the most strategically relevant risks (both internal and external) and the Cybersecurity Department, responsible for monitoring IT risks, were created.

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