Publication: Chile - Financial Sector Assessment Program: Climate Risks and Finance
Loading...
Date
2021-04
ISSN
Published
2021-04
Author(s)
Editor(s)
Abstract
This technical note explores the consequences of climate risks for the Chilean financial sector, and the role the financial sector can play in mobilizing resources to finance Chile’s transition to a climate resilient and low carbon economy. Globally, there is increasing attention being paid to the impact of climate related and environment risks (CRER) on the financial sector. Regulators and central banks – through the Network for Greening the Financial System (NGFS) among other fora – are warning of the impact of CRER on the stability and soundness of financial sectors. These calls follow attention paid to this topic by the FSB Task Force on Climate-related Financial Disclosures (TCFD) and the G20 Sustainable Finance Working Group. There is also global recognition of the importance of financial sectors in mobilizing resources to meet the investment need coming from transitioning to a climate resilient and low carbon society as public resources and concessional finance are not sufficient. Part one will assess how the financial authorities understand and address climate risks. Part two will assess Chile’s efforts to stimulate climate finance.
Link to Data Set
Citation
“Cohen, Charles; Dijkman, Miquel. 2021. Chile - Financial Sector Assessment Program: Climate Risks and Finance. © World Bank. http://hdl.handle.net/10986/37763 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Chile - Financial Sector Assessment Program, December 2021(World Bank, Washington, DC, 2021-11)This Technical Note discusses household indebtedness issues in Chile from a financial consumer protection perspective. The note discusses over-indebtedness concerns and other creditrelated issues practices that appear to be adversely affecting consumers – particularly more vulnerable, lower income consumers – in Chile and gaps in the current financial consumer protection regulatory and supervisory framework needing to be bridged to assist in addressing these issues. The note considers both issues that had already manifested prior to the COVID-19 pandemic and developments during the pandemic. Importantly, the note highlights credit-related issues which warrant focus from a consumer protection perspective even if they may not necessarily be a concern from a stability perspective.Publication Chile - Financial Sector Assessment Program, November 2021(World Bank, Washington, DC, 2021-11)The pension system in Chile is known for the 1980 establishment of a defined contribution, individual account system managed by private pension funds (AFPs). In 2008 a major reform of the system took place to address issues of low coverage and low pension rates. In 2019 the Solidarity Pension rate was raised to the poverty rate following severe social unrest which included protests against the pension system, whilst in 2020-2021 large emergency withdrawals have been allowed from the funds in the context of the Coronavirus (COVID-19) pandemic. The funded pension system has made a significant contribution to financial sector diversification and stability, while promoting sustained economic growth and development, and should be maintained. Further withdrawals should be avoided, and the contribution rate increased. An employer contribution of at least the proposed 6 percent is needed to improve pension levels and could be managed by a public entity with strong governance in a way which complements the AFP system. A non-profit AFP could be established to compete with and act as a standard setter for the private funds managing the existing 10 percent employee contributions. To contribute to long-term investment and financial stability, the multifondos investment regulation should be replaced with a ‘target date’ default, delineated by retirement age, along with a limited number of investment options, with switching contained and some access to funds for specific purposes strictly controlled. The risk-based supervision model of the SP should be recalibrated to further transition from a compliance approach.Publication Chile - Financial Sector Assessment Program, October 2021(World Bank, Washington, DC, 2021-10)This note assesses competitive dynamics and potential impediments in Chile’s financial sector in order to provide actionable policy recommendations. This note contains both a quantitative as well as qualitative assessment of competition. The quantitative assessment explores market characteristics and dynamics, including market structure and concentration, cross-ownership and vertical integration, and customer conditions/consumer power. The quantitative assessment is complemented by a qualitative analysis of the regulatory and institutional framework to understand how private and public interventions shape market dynamics and result in specific market outcomes, including efficiency, degree of market power and consumer mobility (Figure 1). The note will focus primarily on the retail banking sector as well as payment systems and discuss competitive dynamics in other parts of the financial sector only to the extent that they affect these two areas, for example in the context of financial conglomerates.Publication Chile - Financial Sector Assessment Program(World Bank, Washington, DC, 2022-04)Chile has achieved high levels of financial inclusion relative to its level of economic development across a number of headline indicators. Unlike in other countries, gaps in account ownership between men and women, rich and poor, older and younger consumers, and rural consumers are not pronounced. Remaining challenges in financial inclusion include pockets of underserved segments and opportunities to further increase in online payments and digital financial services (DFS). There is also opportunity to improve the availability of savings, credit, and account products that are appropriately tailored to meet the needs of underserved consumers. Greater digitalization of the financial sector can help Chile to address some of the remaining challenges for financial inclusion in Chile. Several key elements of a well-functioning DFS ecosystem could be strengthened. At a broader level, the Fintech Bill should be passed to allow for greater innovation and competition in the financial sector. A range of opportunities exist to build off of Chile’s relatively advanced national payments infrastructure to help further expand in low-value retail payments and digital payments. There are indications that interest rate caps have inadvertently constrained access to finance for Chilean microenterprises. Legal and regulatory reforms could be considered to encourage microsavings. Banco Estado has played a huge role in advancing financial inclusion in Chile. To move to the next stage of financial inclusion, it is recommended that a national financial inclusion strategy (NFIS) be developed that is holistic and comprehensive.Publication A Framework for Assessing Systemic Risk(2010-04-01)When faced with financial crises, authorities worldwide tend to respond aggressively with public support measures. Given the adverse impact on moral hazard and market discipline, support measures involving public money are ideally limited to crisis situations involving systemic risk: a disturbance in the financial system that is serious enough to affect the real economy. This note sets out the main characteristics of a systemic risk assessment framework: a simple analytical framework that can be used by authorities with financial crisis management responsibilities in times of financial crisis to assess the extent to which that particular crisis situation poses systemic risk.
Users also downloaded
Showing related downloaded files
Publication World Development Report 2017(Washington, DC: World Bank, 2017-01-30)Why are carefully designed, sensible policies too often not adopted or implemented? When they are, why do they often fail to generate development outcomes such as security, growth, and equity? And why do some bad policies endure? This book addresses these fundamental questions, which are at the heart of development. Policy making and policy implementation do not occur in a vacuum. Rather, they take place in complex political and social settings, in which individuals and groups with unequal power interact within changing rules as they pursue conflicting interests. The process of these interactions is what this Report calls governance, and the space in which these interactions take place, the policy arena. The capacity of actors to commit and their willingness to cooperate and coordinate to achieve socially desirable goals are what matter for effectiveness. However, who bargains, who is excluded, and what barriers block entry to the policy arena determine the selection and implementation of policies and, consequently, their impact on development outcomes. Exclusion, capture, and clientelism are manifestations of power asymmetries that lead to failures to achieve security, growth, and equity. The distribution of power in society is partly determined by history. Yet, there is room for positive change. This Report reveals that governance can mitigate, even overcome, power asymmetries to bring about more effective policy interventions that achieve sustainable improvements in security, growth, and equity. This happens by shifting the incentives of those with power, reshaping their preferences in favor of good outcomes, and taking into account the interests of previously excluded participants. These changes can come about through bargains among elites and greater citizen engagement, as well as by international actors supporting rules that strengthen coalitions for reform.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Global Economic Prospects, January 2024(Washington, DC: World Bank, 2024-01-09)Note: Chart 1.2.B has been updated on January 18, 2024. Chart 2.2.3 B has been updated on January 14, 2024. Global growth is expected to slow further this year, reflecting the lagged and ongoing effects of tight monetary policy to rein in inflation, restrictive credit conditions, and anemic global trade and investment. Downside risks include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, weaker-than-expected activity in China, trade fragmentation, and climate-related disasters. Against this backdrop, policy makers face enormous challenges. In emerging market and developing economies (EMDEs), commodity exporters face the enduring challenges posed by fiscal policy procyclicality and volatility, which highlight the need for robust fiscal frameworks. Across EMDEs, previous episodes of investment growth acceleration underscore the critical importance of macroeconomic and structural policies and an enabling institutional environment in bolstering investment and long-term growth. At the global level, cooperation needs to be strengthened to provide debt relief, facilitate trade integration, tackle climate change, and alleviate food insecurity.Publication The Role of Desalination in an Increasingly Water-Scarce World(World Bank, Washington, DC, 2019-03)The cost of desalination has been plummeting over the years. As a result, desalination has become a viable option for certain strategic uses. Today, over 20,000 desalination plants in more than 150 countries supply about 300 million people with freshwater every day. Initially a niche product for energy rich and water scarce cities, particularly in the Middle East, the continued decrease in cost and environmental viability of desalination has the potential to significantly expand its use - particularly for rapidly growing water scarce coastal cities. Desalination can be seen as one option in a portfolio water supply sources, including traditional surface water and groundwater sources as well as wastewater reuse, to meet growing water demand gap. Although still relatively expensive, desalination offers the potential to enhance system reliability. As renewable sources of energy such as wind and solar expand, and as advances in concentrate management techniques make discharges from desalination plants much cheaper and safer, the prospect of producing freshwater from the sea without increasing greenhouse gases and without significant damages to the local environment become more promising.Publication World Development Report 2018(Washington, DC: World Bank, 2018)Every year, the World Bank's World Development Report takes on a topic of central importance to global development. The 2018 Report, Learning to Realize Education's Promise, is the first ever devoted entirely to education. Now is an excellent time for it: education has long been critical for human welfare, but is even more so in a time of rapid economic change. The Report explores four main themes. First, education's promise: Education is a powerful instrument for eradicating poverty and promoting shared prosperity, but fulfilling its potential requires better policies - both within and outside the education system. Second, the learning crisis: Despite gains in education access, recent learning assessments show that many young people around the world, especially from poor families, are leaving school unequipped with even the most foundational skills they need for life. At the same time, internationally comparable learning assessments show that skills in many middle-income countries lag far behind what those countries aspire to. Third, promising interventions to improve learning: Research from areas such as brain science, pedagogical innovations, or school management have identified interventions that promote learning by ensuring that learners are prepared, that teachers are skilled as well as motivated, and that other inputs support the teacher-learner relationship. Fourth, learning at scale: Achieving learning throughout an education system will require more than just scaling up effective interventions. Change requires overcoming technical and political barriers by deploying salient metrics for mobilizing actors and tracking progress, building coalitions for learning, and being adaptive when implementing programs.