SANTIAGO (Reuters) – Tighter external financing conditions could impact Chile’s households, businesses and mortgages, increasing default risks they might face, the central bank said on Wednesday.
In its Financial Stability Report for the second half of the year, the bank said households’ financial position continues to improve but remains below pre-pandemic levels.
It said the local banking system had enough guarantees and capital to withstand severe shocks. Despite that, the bank said the main risk to domestic financial stability was posed by external factors.
“Elevated levels of public and private debt in the world, along with high deficits, are the main worry,” the report said, noting this had led to high long-term interest rates.
It added that rising geopolitical tensions over the past few months could have a negative impact on stability. Those most impacted would be groups the bank considers “most vulnerable”.
On Tuesday the bank’s board voted unanimously to keep capital requirements for risk assets at the current level of 0.5%, a measure activated in May 2023 that obliges banks to set aside a cushion to absorb potential losses.
(Reporting by Fabian Andres Cambero and Natalia Siniawski; Editing by Alexander Villegas and Mark Heinrich)
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