Chile Forum

Yes they are insured both by the government and private insurance. The difference is that they are 100% insured without limit ( for most types of deposits), when you add in the private insurance on top of government protections. There is no fuzzy $250,000 cap. For example, Banco Estado is directly owned by the Chilean government, and is essentially underwritten by the Central bank, and all deposits are fully insured. The Chilean central bank also has way more direct authority and control over private banks, both directly on a regulatory level and indirectly by throwing around their weight via Banco Estado. Like last year they basically just ordered all the banks to lower their interest rates and start lending, by pumping money in to Banco Estado to make home and consumer loans. They also dropped the interest rates on those loans. It kind of put the private banks in a lend it or loose it position. They also lowered the interest rates on what banks pay on accounts, which got people pulling money out and investing it in things like real estate.

There is none of that political wrangling that goes on in the states about who is in charge, and who has authority to do what.

This has come up before. Here is the relevant page at the Superintendencia de Bancos:

http://www.sbif.cl/sbifweb/servlet/Cono ... tenido=482

In short, current accounts are fully backed by the government whereas most fixed deposit accounts are only covered up to a limit of around 2.2 million pesos (over all your accounts). But that's just the "state guarantee" -- I don't know about private insurance.

James.

As I understand the banks carry private insurance, and then you can also buy an insurance policy on top of it. For example, I have various insurance specifically to cover fraud, stolen checks, and so on.

Like last year they basically just ordered all the banks to lower their interest rates and start lending, by pumping money in to Banco Estado to make home and consumer loans.

Does this give anyone else an uncomfortable feeling?

Not really. Everyone is always complaining about the U.S. no longer being on the Gold Standard; well, the Chilean banking system and the currency is underwritten by massive copper (and Gold) reserves of the Chilean Government. The concept that banks are a national institution chartered by governments to serve a critical economic purpose and are not just a private entity that exist for the sake of the stock holders, is something that disappeared in the States and much of Europe a long a time ago. Everyone is paying for it now.

Come on, you don't think the U.S. federal reserve is doing anything better? The U.S. fed just happened to do it in ways that favor their political buddies, rather than the public interest. Billions and billions (think it is more like several trillion) of tax payers money pumped in to banks, with no requirement that they lend it or invest it in anything (and they are not). No accountability for it, because it is a trade secret. Not to mention the forced shotgun weddings, between the 'too big to fail', and 'too small to have political influence' is incredible. It is banana republic corruption at its finest.

admin wrote:The concept that banks are a national institution chartered by governments to serve a critical economic purpose and are not just a private entity that exist for the sake of the stock holders, is something that disappeared in the States and much of Europe a long a time ago.

I don't think that was ever the case.