SANTIAGO (Reuters) – The board of Chile’s central bank on Tuesday activated a counter-cyclical capital buffer, setting the measure at 0.5% of risk-weighted assets for one year.
The measure, which requires Chilean banks to set aside a cushion to absorb any potential losses, is meant to boost the economy’s resilience in the face of severe stress scenarios, the central bank said in a statement.
In Chile, macroeconomic imbalances “continue to adjust,” the central bank said, and credit default for both households and firms has risen.
However, stress tests of the banking system attest to its solvency, the central bank added.
The buffer measure has been activated “as a precautionary measure” considering the higher level of uncertainty externally, the bank said.
The move “will have limited and temporary effects on the evolution of credit,” the bank also said.
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(Reporting by Natalia Ramos, Writing by Kylie Madry; Editing by Brendan O’Boyle)