This is a very special year for Banco de Chile. We are celebrating 125 years in business, during which time we have experienced first hand the tremendous progress that Chile has made. We have been there supporting business and development in both the good times and during crises that have affected the country. I would like to say very humbly that we consider ourselves part of Chile’s history.
A commemoration like this one provides a perfect opportunity to pause for a moment, draw lessons from the past and think about the challenges facing future generations. I would like to start by sharing some ideas about this with you.
Although Chile is a small economy, it is highly integrated with the rest of the world and enjoys Latin America’s highest GDP per capita and one of the greatest levels of development, even among emerging economies. Over the last 30 years, Chile has increased its GDP per capita nearly tenfold, cut its inflation rate by 90% (from 30%) and reduced poverty to less than 10%, given that more than 60% of the population is now middle-class.
Even though many factors have played a part in that success, I would like to focus on one particular element: the contribution that the capital market has made to growth and to the wellbeing of the population directly. In the 1980s, Chile implemented a series of reforms, such as making its central bank independent, creating a pension system based on personal savings and strengthening a series of institutions, thus sharply boosting the development of its capital market. This is why businesses in Chile are able to access very long-term financing in the local market, which undoubtedly promotes investment. It’s also why individuals can purchase homes at very low interest rates and with financing terms of over twenty years. Chile has the highest banking penetration rate in the region (around 90% of GDP), with a very well-capitalised system and default rates seen only in more developed economies.
Achieving further progress
There is no doubt that we have many reasons to be proud, but we cannot rest on our laurels. Looking ahead, we face many challenges as a country, an industry, and a bank.
At a macro level, one of the main challenges is to modernise our regulations in order to favour a healthy financial system (through capital requirements) and internalise the technology boom that has given rise to fintechs, while avoiding unwanted effects for the population. For that reason, it is fundamental to adapt general global regulatory principles to the reality of each country, so as to not hinder local development. In Chile, a modernisation of the General Banking Law is currently being discussed. This will modernise capital requirements and strengthen the supervisor’s corporate governance and banking resolution standards.
At an industry level, we must synchronise with major changes in society, including more demanding clients, new regulatory standards, more intense competition and a rise in non-traditional banking activities. As a result, excellent service, higher standards of transparency and closer ties, not only with customers, but with society as a whole, are mandatory to sustain the industry long-term.
At Banco de Chile, we are cognizant of this new reality. Along with the decision to continue being a universal bank that serves all banking segments, from consumer finance to large multinational corporations, we have a renewed focus on three main strategic priorities: first, placing the customer at the centre of all decisions, where quality of service is the top concern.
Second, a special focus on continuous improvements in efficiency and productivity, where elements such as digital transformation and improvements to customer service models are essential. Finally, our commitment to the development of Chile, where we strive each day to deepen our relationships with different groups within the community, beyond our customers, which gives us a solid foundation for long-term sustainability.