A central task performed by the Central Bank aimed at financial stability is the publication of the Financial Stability Report, twice a year. The banking regulation has evolved gradually and steadily, adopting proven international standards and best practices. A new General Banking Law will provide for a gradual convergence to the Basel III framework, which will raise the quality, consistency and transparency of the capital base; strengthen risk hedging; introduce leverage limits; promote a countercyclical capital framework; and introduce a global liquidity standard. These requirements will be implemented gradually through 2019. They will provide higher stability and sustainability and contribute to Chile’s reputation and access to international markets. Chile largely complies with the Principles for Financial Market Infrastructure established by the BIS. An assessment made by the World Bank and the IMF last year identified a high level of compliance with the principles on the part of the entities assessed, as well as the authorities. The main conclusion was that Chile has sound and robust financial market infrastructures, in line with international standards and best practices on risk management, the finality and irrevocability of settlement, efficiency and transparency. The Chilean financial market is, in general, deeper than those of other Latin American countries, with larger institutional investors and greater maturity. Banks' capital adequacy indicators are similar to those of other economies in the region, but lower than in OECD countries, while their exposure to credit risk is low relative to both OECD and emerging economies.

Experience in the run-up to the crisis suggests, if anything, the opposite. Paying in equity appears to have increased the probability of failure. Among US bank CEOs pre-crisis, the top five equity stakes were held by Dick Fuld (Lehman Brothers), Jimmy Cayne (Bear Stearns), Stan O’Neill (Merrill Lynch), John Mack (Morgan Stanley) and Angelo BIS central bankers’ speeches  7  Mozilo (Countrywide). This is not a random sample. 16 It also suggests the macro-economic costs of this principal/agent problem may have been non-trivial. (b)  Collective action problems: the “ownerless corporation”  A second stakeholder friction arises because a diffuse and dispersed set of shareholders are likely to find it difficult to corral management (Shleifer and Vishny (1986)). There is a coordination problem among shareholders. Moreover, most individual shareholders tend to have modest amounts of skin in the game. This reduces their incentives to exercise corporate control in the first place. This shareholder collective action problem is not new. It lay at the heart of Berle and Mean’s concern about “ownerless corporations” in the 1930s. But there are good reasons for believing this problem may have become more acute since then, as the shareholder base has become more fragmented and diffuse and shareholder co-ordination more difficult (Kay (2012)). One reason is that the role of institutional investors has changed. They have tended historically to play an important stewardship role. But this role has waned. As recently as 1990, pension funds and insurance companies held more than half of UK equities.