Central Bank
According to the survey, 60% of banks surveyed revealed that they have imposed greater restrictions for granting loans to large companies (85.7% had been recognized in the survey of the previous quarter), while 44% did so for small and medium-sized enterprises (73.7% in the previous quarter). Several entities have also increased their requirements for the granting of personal and mortgage loans (29.4% have done so for the first and 18% for the latter). As you can be seen, the credit market in Chile feels the impact of the crisis by the supply side. But also feel it by the demand side. It is an economic overview in continuous deterioration and higher requirements have caused a contraction of demand for credit. According to the survey of the Bank Central Chile, 47.1% of the entities noted a fall in demand for personal loans, 35.3% sees it in mortgage loans. As regards the credit to companies, 30% of the entities detected a fall in demand in the segment of large enterprises, while 22.2% has been observed in the small and medium-sized business.
If the cost of funding of banks in Chile has declined strongly so far this year: why banks are less willing to provide? Simply by the deterioration of the internal as well as external economic context which increases credit risk and requires banks to keep more liquid to avoid stressful situations (which can cause such large volumes of deposits output). What happens in the credit market of Chile is a normal behavior that occurs in situations where there is an increase of macroeconomic volatility. In situations of economic stress, authorities corrected their Diagnostics of risks and seek more conservative positions. Therefore they shorten deadlines and reduce the amounts granted. In addition, and despite the fact that the Central Bank of Chile has heavily cut its interest rate of reference (rate that results from reference to the rest of the interest rates), the Chilean banking entities have increased their spreads. This behavior corresponds by the increase in the risk premium that they perceive.
If the actions of the Central Bank of Chile are not achieving the proposed objectives: one can speak of mistakes in the conduct of monetary policy? One may think that the little effectiveness which is having the Central Bank of Chile in its objectives (towards mid-2008 he was incapable of controlling inflation and currently can not do too much to stimulate the economy), are due to errors in the conduct of monetary policy. However, what is happening is that the tool with which the Central Bank of Chile, is worth is not having the desired effects because in situations of crisis like the present, multiple factors influence negatively on the loan offer. In this sense, so that monetary policy effectively encourage domestic demand, it should be complemented with direct measures that stimulate the generation of credit. In this sense, towards the end of March, the Chilean President Michelle Bachelet announced further measures of economic stimulus including the mentioned facilities for accessing Bank financing (including measures to encourage mortgage lending) and measures aimed at increasing competition in the sector (where provided for increasing the capacity of insurance companies, which may provide more resources to the private sector). These actions to act directly on the credit market, together with others that seek to increase the competitiveness of Chilean companies, complement the effectiveness of monetary policy in Chile, in the short term at the time that in the medium and long term, strengthen the economy. They have these measures the expected immediate impact?
