LatinNews Daily - 25 May 2023

In brief: Chile’s central bank defends countercyclical capital buffer

* The president of Chile’s central bank (BCCh), Rosanna Costa, has defended the bank’s countercyclical move the previous day to raise capital requirements on financial institutions, a measure that tightened credit conditions amid concerns over Chile’s vulnerability to a potential global shock. Costa said that “it’s impossible to rule out events in which the economy is once again subjected to significant stress,” adding that “this doesn’t mean that this scenario is more or less likely than in the recent past or that the Chilean or global economy is close to facing new disruptions or a crisis situation, simply that experience shows us that the probability of extreme events happening is not zero and therefore it is our responsibility to prepare adequately.” Costa was referring to the BCCh’s decision to activate a countercyclical capital buffer, setting the measure at 0.5% of risk-weighted assets for one year. Explaining its decision, the BCCh stated that this was “a precautionary measure amid higher global uncertainty,” noting that “although the macroeconomic outlook has evolved in line with expectations, the risk of a severe external shock cannot be completely ruled out”

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