Highest Authorities 7
Historical Background 9
List of Authorities since its creation 16
Legal Provisions 19
- First Organic Law 19
- Second Organic Law 19
- Third Organic Law 20
- Organic Law of the Monetary Council and of Banco Central de Chile (Legislation
in force) 20
Nature, Objectives and Supervision 23
- Judicial Nature 23
- Auditing 23
Faculties and Operations 25
- Domestic Financial Attributions 25
- Normative Attributions 25
- Loan and Financing Functions 26
- Foreign Financial, Foreign Exchange and Foreign Trade Attributions 27
- Supervising Attributions 29
- Issuing Attributions 29
- Administrative Attributions 29
- Other 30
Currency, Gold and Foreign Currency 31
- Currency 31
- Gold and Foreign Currency Reserve Fund and Special Drawing Rights (SDR)
33
Organization 35
- Executive Committee 35
- Composition and Operation 35
- Conflict of Interests 35
- Representation, subrogation and delegation of faculties 35
Administrative Units 35
- Treasury 36
- Direction of Studies 36
- Direction for the Coordination of External Debt 37
- Executive Secretary Direction of the Technical Unit for the Financial
Restructuring Program 37
- Inspector General 39
- Secretary General 39
- Direction of Operations 39
- Direction of Foreign Trade and Intemational Exchange 40
- Intemational Direction 40
- Financial Policy Direction 41
- Administrative Direction 41
The Building 43
The Bank's Collection of Paintings 45
Executive Committee
President Enrique Seguel Morel
Vice-President Alfonso Serrano Spoerer
General Manager Jorge Augusto Correa Gatica
Chief Legal Advisor Jose A. Rodriguez Velasco
Directors
Operations Joaquln Cortez Huerta
Studies Juan A. Fontaine Talavera
Administrative Jose Luis Corvalan Bucher
International Francisco Garces Garrido
Foreign Trade & Int. Exch. Gustavo Diaz Vial
External Debt Coordinator Hernan Somerville Senn
Financial Policy Fernando Escobar Cerda
Exec. Sec. Technical Unit
Financial Restruct. Program Enrique Tassara Tassara
Managers
International Exchange Ambrosio Andonaegui Onfray
Interanal Financing Francisca Infante Vargas
Systems Sergio Arancibia Parodi
Inspector General Vicente Montan Ugarte
Financial Institutions Jose L. Arbildua Aramburu
Administrative Antonio Roco Gonzalez
Monetary Operations Mario Barbe Ilic
Personnel Patncio Roman Figueroa
External Financing Miguel Fonseca Escobar
Studies Francisco Rosende Ramirez
General Treasurer Martin Garcia Correa
Foreign Trade Jorge Rosenthal Oyarzun
Accounting and Finances Francisco Garcia Letelier
Valparaiso Office Patricio Tortello Escribano
International Adolfo Goldenstein Klecky
Coordination Ext. Debt Italo Traverso Natoli
Secretary General Carmen Hermosilla Valencia
Chief Attorney Victor Vial del Rio
From the initial days of Chile's independent life, the need to establish an entity that would give elasticity to the currency became patent. The disturbance deriving from the newly acquired freedom and from the Republic's institutional organization., produced grave damage in the country's economic activity, in general, and in mining, in particular, directly affecting the mint. The shortage of currency constituted a characteristic of the times. To obviate the situation, some trading houses issued notes to bearer, payable in legal currency. These were widely available. The abuse this gave rise to, led to the dictation, in 1839, of a Government decree outlawing the establishment of issuing banks without prior expressed authorization from the State. The decree mentioned above constitutes the first step in Chile's banking and monetary legislaton.
In 1845. the Government appointed a committee to study the possibility of creating a state bank. The project was rejected, but it appointed to a need that several private firms such as, Banco de Chile de Arcos & Cia., and Bezanilla, Mac Clure & Cia. intended to fulfill. A Caja de Credito Hipote- cario was created a few years later, destined to foster agricultural activity, main economic endeavour at the time. This entity became one of the country's most prominent in the mortgage bank business.
On July 28, 1860, a new Law of Banks was dictated. It granted issuing faculties to private loan institutions. This law fundamentally altered the spirit of the 1839 decree by increasing the field of action of private banks. Jean Gustave Courcelle Seneuil, a French Economist hired by Chile's Government to act as Consultant to the Minister of Finance and an Economics Professor at Universidad de Chile, author of the 1860 law, had based the document on liberal principles of the classical school of thought that excluded the need for a central bank to regulate the financial system. According to the theoretic premise on which his economic concept was inspired, the financial system tended automatically towards equilibrium. This concept could have been a success in an environment that did not include a war and strong political conflict, elements that formed part of Chile's historical process at the time.
Stemming from the monetary instability arising during the last decades of the XIX Century, of the constant intention to abandon the paper money regime to return to the gold standard to regulate the system, and due to the evolution observed in the more advanced countries' financial institutions, the idea of creating a National Central Bank began to emerge at the turn of the present century.
At the beginning of the XX Century, the country could feel the pain accompanying the process of international exchange stabilization and see the effects of an overly rigid monetary system that did not respond to the needs of the time. Within this context, Chile slowly began to neglect its agrarian economic structure and started to look towards a form of industrial development. This situation agreed with the growing drive towards the creation of a central bank.
The first legal step in the direction of establishing a central institution empowered to exchange and, eventually, to lend, was given in August of 1918. It was during that time that Mr. Luis Claro Solar presented to the Chamber of Deputies a project towards the creation of a central bank. Disagreements prevailed, however, mainly concerning exchange policy matters and the project was shelved shortly thereafter.
Between 1919 and 1924 several projects on the establishment of a Central Bank were forwarded to be considered by the Government and by Congres where those presented by Guillermo Subercaseaux and by the Senate Committee were the most outstanding. None obtained final approval, however, since no agreement could be reached among the diverse criteria prevalent at the time. The services of Edwin Walter Kemmerer, Professor of Economics at Princeton University, and his team of consultants, were contracted in July, 1925, during the presidency of Arturo Alessandri Palm to evaluate and to structure the financial organization of the country. This committee prepared four studies on diverse, though related, aspects that were fundamental for the creation of our new financial organization. These studies referred to a monetary law that would bring stabilization to paper money and establish gold standard as the base unity; to the creation of Banco Central de Chile; to the dictation of a General Law of Banks and of an organic law for the budget.
The monetary and banking legislation prepared by Kemmerer and his collaborators included the creation of a Central Bank whose objective would be to regulate the currency so as to satisfy legitimate economic needs and to tend towards a stable currency, under the premise of a fixed relationship between the latter and gold.
Banco Central de Chile was founded on August 21, 1925, on the day Law Decree Nr. 486 approving its first Organic Law, was promulgated. This entity started to operate on lanuary 11, 1926. The act of regulating the currency was performed almost automatically through the purchase and sale of gold and foreign currency, and by rediscounting internal loan documents according to certain fixed norms.
In the aftermath of the world crisis of the third decade of this century that deeply affected the country's economy and finance, Banco Central de Chile, like many foreign institutions of the same type, had to abandon automatic regulating principles - that proved useless in the midst of economist recession- and developed various instruments of monetary policy.
During the three following decades, Banco Central de Chile proceeded to gather experience from the evolution of our international economy. In the domestic sphere, for example, we can refer to the difficulties faced by our economy during the Second World War (1939-1945), the part it played in our economic development, the acute inflationary process experienced during the decade of the 50's and the stabilization programs developed in the country following diverse government initiatives. In terms of foreign experience, it is worth mentioning the cyclic movements of world economy, the evolution of financial institutions abroad, the relationship established with foreign financial institutions and monetary cooperation within Latin America.
The variation undergone by the Bank's original objectives derives from the experience drawn from historical or institutional events and from economic theory, and is reflected on the multiple reforms affecting the organic statute as well as on the-ever increasing functions assigned to it an on the evolu- tion of operative practices. Nonetheless, a detailed analysis of the amendments that altered the original objectives of the Bank, drives towards the conclusion that some did not prove to be in the correct direction and others only tended to solve emergency situations.
The first Organic Law of the Bank referred more to monetary balance than those that followed, mainly because it related emission to real market needs and not to fiscal and public firms' requirements. The Organic Law approved in June of 1975 emphasizes, again, stabilizing elements.
The 1925 legislation contained a central and predominant objective: monetary and financial regulation. Afterwards, evolution gradually added new objectives until reaching the point of bestowing, upon Banco Central, ample attributes to provide for economic development, fiscal financing and social reform.
Inflation generated within the framework of these pseudo-social objectives gives birth to an aftermath of price controls, fixed interest and exchange rates, wages and salaries' adjustments, indirect subsidies and indis- criminate statism, all of which developed into a resource assignment process that ran counter to the necessary criteria for efficiency. This led to a slow evolution in the economy and was detrimental to the population's degree of well-being and opportunities.
The majority of the functions that to do not pertain to Banco Central were added between 1940 and 1953, year when its Organic Law underwent reform and all these activities were consolidated, thus transforming this issuing institute into a mechanism of great inflationary power. It is fair to point out that the reform mentioned above contains some innovations that were instrumental for the improvement and the agilization of monetary regulation, but were not able to counter balance the weight of the inflationary potential that had already been generated.
Another innovation of dubious efficiency that was introduced in the decade of the forties and institutionalized in the 1953 Law, was the designation of four parliamentary advisors. These parliamentary advisors frequently obstructed and delayed important decisions related to monetary and exchange policy. In view of the unsatisfactory experience, parliamentary advisors were eliminated in the 1960 reform to the organic law.
The political practices surrounding the process of fiscal budget approval and the initiatives towards expenditure approval and income reduction, generated chronic and increasing deficits in the public treasury. These deficits were financed through laws approved by Parliament with Central Bank emissions that exceeded the requirements set by monetary assets, thus generating inflation.
This situation became untenable during the first three years of the decade of the seventies, and the issuing institute became the main financial instrument in the statization of the economy and the sudden change that affected the economic system. This led to a monetary imbalance of severe magnitude that culminated in an estimated 1,000 percent inflation during the third quarter of 1973.
Actual Situation
Banco Central de Chile's present faculties, role, modes of action and policy are described in its Organic Law(l) that also contains the establishment of a Monetary Council whose function is to determine monetary, loan and foreign exchange policy according to guidelines suggested by the Supreme Government.
This Council, presided by the Minister of Finance, is composed of three ministers in the area of Economy, by the President of Banco Central de Chile and by a representative of the President of the Republic, and is the entity called on to determine the general features of the policies listed above. Its directives concerning specific policy reach all the levels required through the Executive Committee of the Bank.
The specific faculties of Banco Central according to the present legislation may be divided into two categories: one that is clearly regulating and another that refers to the intervention of financial markets.
The main faculties of the regulatory type are: carrying out and controlling international exchange operations, establishing limits in the asset-liability relation for all financial entities, terms of issue for financial instruments, and determining cash positions and technical reserves affecting financial institutions. This category also includes all general regulations related to the juridical-institutional context governing these entities.
A second category contains the faculties of Banco Central that could eventually allow for a financial market intervention.
Banco Central could generate one of these situations by imposing price restrictions, or limits, to the loan market or by intervening as another agent in the market. An example of the first instance would be represented by the faculty to "regulate, quantitatively or qualitatively, the loans granted and other operations carried out" by financial institutions(2). It is worth pointing out, also, towards the possibility of granting or not the authoriza- tion to collect fees and expenses on the part of these entities for some operations(3) and the establishment of ceilings affecting the above mentioned collections(4).
It is possible to think, on the other hand, of various examples of Central Bank's faculty to act directly on the financial market: granting short-term loans to financial entities "in case of emergency''(5), the opening of lines of credit; the faculty to grant refinancing, discount and rediscount letters of exchange and other instruments.
Notwithstanding the above, the authority's monetary policy has been one of non-intervention and non-discrimination in terms of instruments and among entities of the same type. The basic principle has been to establish a clear and permanent type of regulation for financial agents.
Presidents
1926 -1929 D. Ismael Tocornal Tocornal
1929-1931 D. Emiliano Figueroa Larrain
1931-1932 D. Francisco Garces Gana
1932-1933 D. Arrnando Jararnillo Valderrama
1933-1939 D. Guillerrno Subercaseaux Perez
1939-1940 D. Marcial Mora Miranda
1940-1946 D. Enrique Oyarzun Mondaca
1946-1951 D. Manuel Trucco Franzani
1953-1959 D. Arturo Maschke Tornero
1959-1961 D. Eduardo Figueroa Geisse
1959-1964 D. Luis Mackenna Shiell
1964-1967 Dr. Sergio Molina Silva
1967-1970 D. Carlos Massad Abud
1970-1973 D. Alfonso Inostroza Cuevas
1973-1973 D. Carlos Matus Romo(l)
1973-1975 D. Eduardo Cano Quijada
1975-1976 D. Pablo Baraona Urzua
1977-1981 D. Alvaro Bard6n Munoz
1981-1982 D. Sergio de la Cuadra Fabres
1982-1982 D. Miguel Kast Rist(2)
1982-1983 D. Carlos Caceres Contreras(3)
1983-1984 D. Hernan Felipe Errazuriz Correa(4)
1984-1985 D. Francisco Ibanez Barcelo(5)
1985- D. Enrique Seguel Morel(6)
(1) From June 2, 1973 to September 10, 1973.
(2) From April 23, 1982 to September 2, 1982.
(3) From September 3, 1982 to February 13, 1953.
(4) From February 4, 1983 to May 2, 1984.
(5) From May 3, 1984 to January 7, 1985.
(6) From January 7, 1985 to the present.
Vice-Presidents
1926-31 D. Francisco Garces Gana
1931-32 D. Luis Matte Larrain
1932-58 D. Luis Schmidt Quezada
1958-60 D.Vicente Izquierdo Phillips
1960-62 D. Fernando Illanes Benitez
1962-64 D.Felix Ruiz Cristi
1964-67 D. Carlos Massad Abud
1967-70 D. Jorge Cauas Lama
1970-73 D. Hugo Fazio Rigazzi
1973-74 D. Carlos Vio Valdivieso
1974-74 D. Jorge Cauas Larna(l)
1974-75 D. Pablo Baraona Urzua
1975-76 D. Alvaro Bardon Munoz
1977-81 D. Sergio de la Cuadra Fabres
1981-81 D.Hernan Felipe Errazunz Correa(2)
1981-82 D. Ivan de la Barra Valle(3)
1982-83 D. Daniel Tapia de la Puente(4)
1983-84 D. Fernando Ossa Scaglia(5)
1984-85 D. Felix Ruiz Cristi(6)
1985- D. Alfonso Serrano Spoerer(7)
(1) From May 1, 1974 to July 17, 1974.
(2) From April 30, 1981 to December 3, 1981.
(3) From December 3, 1981 to July 15, 1982.
(4) From July 15, 1982 to October 10, 1983.
(5) From November 9, 1983 to Apnl 16, 1984.
6) From Apnl 17, 1984 to January 7, 1985.
7) From January 7, 1985 to present.
General Managers
1926-32 D. Aurelio Burr Sanchez
1932-43 D. Otto Meyerholz Gallardo
1943-53 D. Arturo Maschke Tornero
1955-58 D. Felipe Herrera Lane
1958-62 D. Luis Mackenna Shiell
1962-70 D. Francisco Ibanez Barcelo
1970-73 D. Jaime Barrios Meza
1973-73 D. Hurnberto Trucco Leon(l)
1973-85 D. Carlos Molina Orrego
1985-86 D. Jorge Court Moock 2)
1986- Dr. Jorge Correa Gatica(3)
(1) From June 2, 1973 to September 10, 1973.
(2) From October 2, 1985 to May, 1986.
(3) From May 1, 1986 to present.
Three basic legal texts related to Banco Central de Chile have existed prior to the one presently in force and they have been: Decree Law Nr. 486 dated August 21, 1925, first Organic Law of the Bank; Decree with Force of Law Nr. 106 dated June 6, 1953 and D.F.L. Nr. 247 of March 30, 1960.
First Organic Law
Law Decree Nr.. 486 was promulgated on August 21, 1925 and published in the Official Gazette on August 22, 1925.
The intention to put an end to the situation of monetary abnormality that had become manifest in diverse degrees of intensity in the country's economy since 1860, when the first Law of Banks was dictated, the Government petitioned a group of financial consultants, headed by the North American Economist Edwin Walter Kemmerer, to write the first Organic Law of Banco Central de Chile, that later became Decree Law Nr. 486 of August 21, 1925.
The Bank was constituted as juristic person of public right, and its capital was divided into four types of shares of 50 years' duration and of a markedly classic denomination, emphasizing its banking character as well as its main purpose to function as bank of banks. Its main operations referred to emission and to rediscount, establishing the limits and the prohibitions affecting loans, discounts, and other money advances.
Second Organic Law
The D.F.L. Nr. 106 was dictated on June 6, 1953 and established a new text for the Organic Law of Banco Central de Chile that was published in the Official Gazette on July 28, 1953. The law established that the Bank would be an autonomous entity of indefinite duration and also described its fundamental objective as one "striving towards the orderly and progressive development of the country's economy through a monetary and loan policy that would, while trying to avoid inflationary or depressive trends, allow for a better use of the country's productive resources". From this statement alone, it is possible to deduct that the purpose of the legislator was to bestow on Banco Central more wide-ranging and more active responsi- bilities concerning domestic economy than those granted by the previous organic law. This spirit rules the one currently in force.
D.F.L. Nr. 106, without disavowing any of the functions or the objectives specifically related to banking activities, allowed for the application of economic policies that had a decisive influence on the country's economic development.
Third Organic Law
The D.F.L. Nr. 247 of March 30, 1960, published in the Official Gazette on April 4 of the same year, approved a document that became the third Organic Law of the Bank.
The main changes introduced to the previous Organic Law can be summarized in the following: 1) the composition and the election of the Board of Directors was modified; 2) the Executive Committee was created and charged to comply with the agreements reached by the Board of Directors and to administrate the entity; 3) the faculties of the Bank were increased concerning the appropriations of loans according to zones and the establishment and description of cash positions; and 4) the Bank was authorized to purchase "D" class shares that were in the hands of the public.
Conforming to D.F.L. Nr. 250 of March 30, 1960, published in the Official Gazette on April 6, 1960, Banco Central de Chile and the International Exchange Commission were authorized to merge and the faculty to dictate general norms applicable to imports and exports, as well as to international exchange operations, was granted to the Executive Committee of Banco Central.
Organic Law of the Monetary Council and of Banco Central de Chile (Legislation in force)
Banco Central de Chile is presently ruled by the provisions contained in its Organic Law and its ensuing amendments, approved by Decree Law Nr. 1,078 of June 25,1975 and published in the Official Gazette on June 28, 1975.
NATURE, OBJECTIVES AND SUPERVISION
Juridical Nature
Banco Central is an autonomous entity, with juristic personality, of indefinite duration and domiciled in Santiago.
The Minister of Finance acts as the link in the relationship between the Bank and the Government.
For the purpose of defining the extent of its faculties, Banco Central is described as an institution of public right. As it is expressly established in its Organic Law, however, Banco Central is not considered a part of the State administrative apparatus, nor are the public sector general or special regulations applicable to it. Consequently, the Bank and its personnel are ruled by Private Sector regulations.
Auditing
The supervision of Banco Central is in the hands of the Superintendency of Banks and Financial Institutions, entity that receives the Bank's Annual Balance Sheet and other required reports and documents.
There is a close relationship between Banco Central and the Super- intendency of Banks relating to the study and the application of norms that govern the activity of banking enterprises. In some matters, especifi- cally described in the Organic Law, Banco Central must consult and request reports prior to the dictation or the application of certain norms.
The objective of the Bank is to foster orderly and progressive development of the country's economy through the application of monetary, credit, capital market, foreign trade and international exchange, savings, and other policies, as required by law.
In order to fulfill its objectives, the Bank's Organic and other laws allow for the exercise of certain faculties and operations that may be grouped into five large categories in terms of attributions:
Domestic Financial
Foreign Financial, of Foreign Trade and of Foreign Exchange
Supervising
Issuing
Administrative and
Others.
Domestic Financial Attributions
This category includes all faculties and attributions Banco Central may exercise as a result of formulating monetary, loan, capital market and savings policies.
The financial attributions of a domestic character may be subdivided into normative functions and loan and financial functions.
Normative Functions
Are those exercised by Banco Central concerning the financial system through the dictation of norms that are applicable to banks and other financial institutions. In the use of these faculties, the issuing institute may:
a) Dictate norms and conditions for taking in funds from the public,
b) Quantitative and qualitative regulation of loans and other operations performed by financial entities, private persons, and firms that habitually carry out borrowing and lending operations with the public's money;
c) Determine cash positions and technical reserves;
d) Establish interests that can be paid on sight or term deposits;
e) Establish maximum interests to be paid on checking accounts and the collection of fees;
f) Determine maximum amounts to be charged for fees and expenses
g) Dictate regulations and limits ruling financial institutions concerning endorsements and bonds;
h) Establish the relation to exist between asset and liability operations of financial institutions; and
I) Dictate the norms guiding firms- whose line of business consists on issuing credit cards or the operation of any other similar systems that are subject to the supervision of the Superintendency of Banks and Financial Institutions
Loan and Financing Functions
Are those destined to finance loan-granting entities and those exercised by Banco Central itself for the purpose of regulating the currency or to fulfill the general objective of the Bank. The following attributions are included:
a) Open lines of credit and celebrate the corresponding contracts;
b) Grant emergency loans for periods not exceeding 90 days
c) Refinance, discount and rediscount letters, promissory notes, and other instruments negotiable in domestic or in foreign currency;
d) Authorize the creation and rule clearing house operations, checks, and other instruments;
e) Receive deposits in domestic or in foreign currency from banking firms and financial companies;
f) Cede documents pertaining to its placement or investment portfolio to domestic financial entities, legally authorized to carry out borrowing and lending operations concerning financial resources;
g) Issue and place instruments in the market on its own account.
h) Rescue such instruments through amortizations or drawings or by purchasing them in the market;
i) Purchase and sell bonds, debentures, or other fixed rent instruments in the market;
j) Purchase and sell gold without restriction, except for sales and services tax;
k) Receive goods or instruments as guarantee;
l) Determine interest rates applicable to operations carried out by Banco Central.
The attributions described in letters a, b, c, e and f may only be exercised by Banco Central relative to Banks and Financial Intermediaries. Foreign Financial, Foreign Exchange and Foreign Trade Attributions
These powers and operations mainly emanate from the Organic Law of Banco Central, from the Law on International Exchange, and from Decree Law Nr. 1,444. These provisions grant Banco Central the faculty to dictate norms applicable in Chile, or to act abroad as the result of commercial and financial relations created by natural or juridical person performing business abroad, international exchange and foreign loans. In terms of the above, Banco Central may:
a) Participate, on behalf of the Government, in international entities as determined by law;
b) Apply international agreements celebrated by the Government and related to the Bank's activity;
c) Contract all types of foreign loans and cede or transfer them to banking firms and other financial intermediaries;
d) Exercise the faculties and attributions granted by the Law on International Exchange and by other laws referred to foreign trade and to international exchange;
e) Carry out international exchange operations;
f) Authorize banks, financial institutions and individuals to carry out international exchange operations;
g) Import or export gold without restrictions;
h) Grant loans in foreign or domestic currency to foreign Governments, Central Banks or financial or banking entities, foreign or international;
i) Receive deposits in domestic or foreign currency from central banks or banking or financial entities, foreign or international;
j) Maintain the gold and foreign currency reserve fund in deposit in own bank or in foreign banks of reknown responsibility;
k) Act in all matters related to servicing the amortization of the external debt contracted by the Government and by Cities;
l) Represent the State and indebted corporations in the conversion and the re negotiation of the public external debt;
m) Centralize and process all statistical information referred to external debt; carry out studies and make official information available;
n) In line with Finance Decree Nr. 742 of October 15, 1981, act as the competent authority in the initiation, carrying out and conclusion of investigative studies referred to in the "Agreement relating to the inter- pretation and the application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade".
Supervising Attributions
This category includes operations and faculties carried out by Banco Central as the Government's financial agent and others expressly granted by Law. Thus, Banco Central can or may:
a) Act as Supervising Agent in domestic and foreign loan contracts and other operations trusted by the Treasury that are in line with the Bank's activities;
b) Amortize or pay obligations of the Treasury with Banco Central, using the product of the valorization of the Gold or Foreign Currency Reserve Fund.
Issuing Attributions
The exclusive authority of Banco Central de Chile to issue currency and to mint coins is described and ruled by Articles 17 and 45 to 49 of the Organic Law. According to these, Banco Central may or should:
a) Issue currency and mint coins as sole means of payment with liberating power and unlimited circulation;
b) Contract the printing of bills or minting of coins inside the country or abroad;
c) Define the characteristics of the bills and coins;
d) Withdraw from circulation the bills in poor condition and pay their nominal value or part of it, depending upon the case; and
e) Destroy the bills definitely withdrawn from circulation in the manner determined by the Bank's Executive Committee.
Administrative Attributions
This group includes all faculties referred to the internal direction and administration of the Bank and its personnel. According to these, the Executive Committee may or should:
a) Carry out the general administration of the Bank;
b) Hire required personnel and determine remuneration, duties and obliga- tions;
c) Delegate administrative, operative and representative faculties on certain Bank officers and personnel;
d) Purchase and keep buildings needed to operate;
e) Acquire property transferred in loan payments and dispose of it.
Other
Notwithstanding the attributions mentioned above, it is worth pointing out that Article 1, Letter a) of Law Nr. 18,104 of January 27, 1982, trusted Banco Central de Chile the task of preparing domestic accounts and other economic and social accounting systems.
Currency
The "peso" was established in 1925 as Chile's monetary unit, with a fine gold content of 0.183057 grams. The peso was divided in one hundred cents. Also, ten pesos constituted one "condor".
Inflation rendered fraction coins useless until, in 1955, a legal provision established that obligations had to be paid in whole peso figures.
After the dictation of Law Nr. 13,305 of 1959, that changed the monetary unit from pesos to escudos as of January Ist, 1960 (E¡ = $ 1,000), the Organic Law of March 30, 1960 established, in Article 51, that the bills should express values in escudos, cents and half cents, depending upon the case, and include the national emblem. A new legal disposition in 1973, Decree Law Nr. 231 of December 31, 1973, eliminated the fractions of the escudo in accounting reports and in documents issued in domestic currency. The "peso" was established again in 1975 as the countries monetary unit. According to Decree Law Nr. 1,123, published in the Official Gazette on August 4, 1975, the peso became Chile's monetary unit and its value and liberating power is equal to one thousand escudos.
The Bank holds exclusive rights to issue bills and mint coins. Although the law authorizes Banco Central to hire these services outside the country, they are totally produced in Chile, in the workshops of Casa de Moneda. The characteristics of the bills and their security marks (water stamp and national emblem), and those on the coins, are determined by Executive Committee agreement that is published in the Official Gazette.
These bills and coins constitute the only means of payment with liberating power and unlimited circulation, legally binding in all the country's territory and due to be accepted for their nominal value.
It is Banco Central's responsibility to withdraw from circulation all bills in poor condition. These bills are cashed according to the following norms:
a) Bills in poor condition that retain, at least, three fifths of their total surface, will be exchanged for their nominal value, as long as those three fifths form part of one whole.
b) Bills destroyed in less than three fifths and the portion exceeding the remaining two fifths are found to be in good condition, will be cashed for one half of their nominal value as long as it is possible to verify the series and number of the bill and that the two fifths form part of one whole.
Gold and Foreign currency Reserve Fund and Special Drawing Rights (SDR)
The Bank keeps Reserve fund in gold, foreign currency and Special Drawing Rights (SDR). This reserve fund bears no relation with circulating currency or deposits legally received. This reserve fund may be constituted by:
a) Gold in ingots or coins or foreign currency available in the Bank's vaults;
b) Gold in ingots or coins or currency deposited in foreign banks of acknowledged responsibility defined by the Executive Committee.
c) Special Drawing Rights (SDR) assigned to Chile by the International Monetary Fund each time the entity decides to distribute SDR among member countries.
Concerning gold, the Bank is empowered to purchase and sell, import or export it without restriction, tax or fiscal duty, except the Sales and Services Tax, affecting purchases.
The product, in domestic currency, resulting from the valorization of the gold or foreign currency reserve due to changes experienced by the official parity, should be destined, in the proportion determined by the Committee, to the following:
a) Amortize or pay Treasury obligations with Banco Central and
b) Increase Reserve Funds.
Casa de Moneda de Chile may be petitioned to mint gold coins, in unlimited quantities, charging the respective item, and this entity will be granted priority relative to other entities or individuals.
EXECUTIVE COMMITTEE
The Bank's top authority is the Executive Committee, in charge of directing and administrating Banco Central and, also, responsible of exercising all the faculties and attributions granted to it by the Organic Law and other laws.
Composition and operation
The Executive Committee is formed by the President, the Vice-President and the General Manager of the Bank, named by the President of the Republic by Supreme Decree of the Ministry of Finance.
It operates with the majority of its members and its agreements are adopted by a majority. In case of a tie, the member presiding the Committee casts a definitory vote.
Conflict of interests
Executive Committee members are subject to diverse incompatibilities and may not perform duties that are remunerated with fiscal o municipal funds. Likewise, they may not participate in the proprietorship or functions of financial institutions, nor perform any kind of activity in foreign trade firms or in carrying out international exchange operations.
Representation, Subrogation and delegation of faculties
The Committee is charged with the judicial representation of the Bank and can delegate its administrative, operative and representational faculties on members of the Committee or on other Bank officers.
The President of the Bank holds extra-judicial representation of the institution.
The General Manager is in charge of the judicial representation of the Bank, according to Article 8 of the Code on Civil Procedure and to faculties granted and instructions imparted by the Executive Committee.
Administrative Units
The functions of the Bank are mainly carried out in a decentralized manner according to specialty by administrative units that are subject to the authority of the Executive Committee and General Management.
The following units are subject to the Executive Committee: Office of the Treasury, Direction of Studies, Direction of External Debt Coordination, Executive Secretary Direction for the Technical Unit of the Financial Restructuring Program, Inspector General and Secretary General.
Subject to General Management are: Administrative Direction, Direction of Operations, Direction of Foreign Trade and International Exchange, Inter- national Direction, Direction of Financial Policy, and Regional Offices.
Treasury
Its main functions are the following:
a) Look after the legal aspects of all agreements, acts and contracts of the Bank.
b) Act as judiciary representative of the Bank in Court.
c) Prepare general reports on legal provisions and, also, judicial reports on specific matters pertinent to them.
d) Prepare and/or review contracts or agreements concerning the Bank and report on the legal background of the entities operating with it.
e) In general, assist the Executive Committee and other Bank units in matters pertaining or relating to the judicial field.
f) Inform, analyze and, if the case be, suggest changes to contracts and documents in general, concerning foreign loans contracted by agencies and public entities.
Direction of Studies
Its functions are to:
a) Quantify and project the trajectory of the country's economic activity, the financial and monetary situation and the balance of payment position.
b) Evaluate the execution of financial, monetary, exchange, foreign trade, external debt and international reserve policies, considering alternative courses of action.
c) Analyze and evaluate real development in the monetary, loan, exchange, capital market and balance of payment fields.
d) Assist the Executive Committee and other Bank units in all matters of macroeconomic transcendence.
e) Participate in the preparation of the monetary program developed by the Bank.
Direction for the Coordination of the External Debt
ÊIts functions are to:
a) Coordinate relations and carry out negotiations with foreign commercial banks relative to foreign financing as planned by the Bank.
b) Be in charge of the relations with the agent bank and the consulting committee named by the foreign banks for the re negotiation of the financial system and the corporative sector's external debt.
c) Carry out its activities abiding by general policies and instructions established by the Minister of Finance and/or by the Executive Committee.
d) Assist the Executive Committee and the International Reserves Policy Committee in the formulation of policies.
Executive Secretary Direction of the Technical Unit for the Financial Restructuring Program
Its functions are to:
a) Administrate and execute the Private Sector Financial Restructuring Program approving or rejecting loan applications towards obtaining Program resources for financing.
b) Study the norms required for an adequate fulfillment of the Private Sector Financial Restructuring Program and present it to the Executive Committee and to the World Bank, as well as propose any amendment of the norms required for the obtention of the desired objectives.
c) Evaluate and review investment projects presented by the firms partici- pating in the Program, and the courses of action proposed towards the obtainment of financial restructuring.
d) Control disbursement and recovery of the loans granted as well as the development, implementation, and adequate fulfillment of the projects financed with the Program's resources.
e) Make the Program and its characteristics known amongst commercial banks, firms and private and public entities so as to foster the utilization of the resources assigned to the Program.
f) Represent the Technical Unit at the World Bank, domestic and foreign financial institutions or domestic public sector entities.
Inspector General
Its functions are to:
a) Control that the diverse Bank Units perform their duties following legal provisions, rules, approved systems and work procedure, norms and instructions, whichever their source.
b) Examine, supervise and evaluate the effectiveness of the banks Internal control system.
Secretary General
Its functions are to:
a) Act as Secretary during the Executive Committee and Monetary Council sessions.
b) Certify as to the veracity and the authenticity of the Bank's acts and documents.
c) Attend various committees' sessions and attest as to their deliberations and agreements.
Direction of Operations
Its functions are to:
a) Assist the Executive Committee in the formulation of policies relating to domestic and foreign financing.
b) Carry out and control public external debt servicing according to debtors' instructions.
c) Grant loans with domestic and foreign financing according to loan programs as well as control and carry out the corresponding debt servicing.
d) Register and control capital contributions, whether loans or foreign deposits and authorize the corresponding transfer of currency.
e) Manage and control reciprocal loan agreements and other loans granted by agreements or by international entities.
f) Perform issuing, placement, service, rescue and/or reinvestment operations related to instruments issued by the Bank.
g) Control operations of capital transference, purchase of external debt instruments, investments with external debt instruments carried out according to the provisions contained in Chapters IV, VIII and XL- of the Compendium of Rules for International Exchange, respectively.
Direction of Foreign Trade and International Exchange
Its functions are to:
a) Assist the Executive Committee in the formulation of policies relating to foreign trade and to international exchange.
b) Control that foreign trade and international exchange operations carried out by banking firms and natural and/or juristic persons be performed according to legal and normative provisions in force, authorizing such operations and establishing penalties, fines and reconsiderations that are appropriate to the violations detected or reported.
c) Prepare studies, technical reports, release information and other statistical data and, in general, assist authorities, entities and individuals in matters related to foreign trade and international exchange.
d) Keep control of foreign currency checking accounts maintained in banking firms, Republic General Treasury and National Copper Corporation (CODELCO).
e) Define and administer statistical information of the activities developed in the area under its responsibility.
f) Propose to the Executive Committee the amendment of the provisions contained in the Compendium of Rules on Import, Export, and Interna- tional Exchange, in order to perfect the operative scheme. Keep the Compendium of Instructions on Foreign Trade and Exchange updated for Branches.
g) Coordinate foreign trade and international exchange tasks with external institutions of the Bank.
International Direction
Its functions are to:
a) Establish and keep contacts with banks and other financial institutions to obtain updated information concerning international financial markets.
b) Plan, coordinate and carry out reserve administration operations within the framework of the policies defined by the Executive Committee through the International Reserves Policy Committee.
c) Propose to grant, contract, and extend reciprocal loan agreements.
d) Assist the Executive Committee and the International Reserves Policy Committee in the preparation of policies.
e) Counsel and coordinate with the Foreign Relations Ministry in matters related to commercial and financial policy and, particularly, concerning multilateral relations of integrating institutions and mixed bilateral commissions.
f) Coordinate the functions pertaining to the New York Financial Representa- tion Office and the Representative of Japan.
Direction of Financial Policy
Its functions are to:
a) Implement and apply monetary and financial policy approved by the Executive Committee.
b) Carry out periodic evaluations of the patrimonial situation of financial institutions.
c) Evaluate on a permanent basis the monetary policy instruments and the norms that regulate the operations of the financial system.
d) Control the fulfillment of the agreements and laws relative to the normalization of intervened banks and financial institutions in the process of liquidation.
Administrative Direction
Its functions are to:
a) Propose and apply operating policies and procedure for the use of the Bank's human and administrative resources.
b) Take part in the definition, orientation and approval of the Bank's Annual Plan for Administrative Rationalization and Systematization.
c) Assist the upper echelons of the Bank in the formulation of personnel policies, especially in matters concerning remuneration, training, promotions, and well-being and in the administration of human resources.
d) Impart instructions to respond to technical assistance requirements in higher level matters related to administrative studies towards decision- making.
e) Participate in the definition and the establishment of an accounting information system and of the budgetary system and comply with the Bank's legal and/or tax obligations.
f) Participate in the definition of the programs to issue currency, impart the respective printing and mint orders and direct the supply of currency to the economy, in compliance with the policies adopted by the economic authority.
THE BUILDING
The three-story building of Banco Central de Chile, that also includes an underground floor, opened its doors in the year 1928.
The design of the building belongs to Architect Alberto Cruz Montt.
Its frontage on Agustinas Street originally extended to the area that today constitutes the main entrance.
Annexed constructions, until attaining the present form, were in charge the Architects Smith Solar and Smith Miller. They also projected the facade on Morande Street to harmonize with the part that is located on Agustinas. The extension of the latter is 71 meters.
Built surface amounts to approximately 18,000 square meters and the area on which it is located has an approximate extension of 3,800 square meters.
Its style is classical with bronce and marble ornaments that are of solid and legitimate nature, enhancing the characteristics previously described.
Its interior shelters valuable paintings of famous national artists that are distributed in salons and offices of the Bank. Its old bills and coin collection is also worth mentioning.
THE BANK'S COLLECTION OF PAINTINGS
Banco Central de Chile has been able to gather, in the course of its existence, a significant and valuable collection of paintings of national artists that has become an art collection of exceptional diversity and extraordinary artistic quality that is unique in the country.
It contains the outstanding paintings of Juan Francisco &onzalez, known for his portrayal of Chile's adobe, of flowers beautifully set on the shrub and fruit on the ground, natural surroundings projected on the canvas with assured brush strokes and earthy colors that have made him famous. Next to him is Pedro Lira, tenacious invigorator of Chile's fine arts, refined painter of typical landscapes of the past bearing the romantic character that pervades all his work, invariably graceful and excellently drawn, faithful expression of the teachings he imparted.
The perfection of a finished job, the features so artfully transferred to the canvas always fascinate in the case of Valenzuela Puelma, a permanently afflicted artist who died sadly in Paris. A glossier of palm trees of Occa, the painter of open landscapes, Onofre Jarpa's preferred theme, portraying a realistic spirit expressed on the analysis of stones and of clear atmosphere and revealing the beauty of the country's natural woods. The splendid modeling of elegant ladies, Jose Tomas Errazuriz, honored by international awards, impregnates the canvas of a romantic element expressed in fine grays and clean drawing, in line with the academism that was prevalent towards the end of the past century.
The open countryside, the special quality of Orrego Luco expressed in European and national settings are a pleasure to see. "Alameda de las Delicias" constitutes an artful expression of plastic solutions represented by the luminous strokes on the sidewalk. The extremely subtle realism of Ernesto Molina, mysterious master of exotic matters is quite well represented in the collection of national paintings.
The study of the light, transparent blues apparently painted afresh is found in the works of Alfredo Helsby. The table waiting for the diners, the fire at the center of the composition, portrays a situation that is familiar to all. A very personal painter, with is special mauves, tiny and sparkling brush strokes that reflect pleasant familiar moments with intimate friends.
The romantic personality of Pedro Luna, with his trips to the Old Continent and great museums, portrays a viewpoint that differs from the other painters of his generation. The forceful stroke in deep paint, intense colors and grand design are elements to ponder in his "Catedral de Marsella", a jewel among Chile's paintings. The same can be said referring to Arturo Gordon, the most genuine and brilliant exponent of typical national customs. The glorious colors displayed by oranges and lilacs are beautifully apparent to the visitors of our main museum. Rafael Correa pleasantly expresses his ability to portray urban surroundings in Paris, whereas Ramon and Pedro Subercaseaux, father and son, demonstrate the nobility of their task and their interest in historical matters.
The collection includes over three hundred paintings and there are almost fifty outstanding artists. Thus the difficulty to refer to each one of them in these lines. (R. Bindis)