FinTech Law and new Constitution under the eyes of five experts in banking and finance

A few weeks ago, the latest specialized IFLR 1000 ranking was published, which classifies the best studies in Banking and Finance, where thirty Chilean firms were recognized in different bands as the best in the country in said specialty (See box).

It is a discipline accustomed to regulation in a highly dynamic and constantly evolving market, and which is now looking closely at the challenges that lie ahead, in particular, with the emergence of the FinTech industry and the eventual approval of a new constitution.

On this last point, not everything is negative. Several lawyers highlight the inclusion of the principle of fiscal responsibility in the articles of the draft of the new Constitution, in addition to the constitutional statute of the Central Bank, which coincide, was “reasonably regulated”.

However, Prieto’s lawyer, Isabel Monge, warns that the new text imposes guidelines that may be contradictory. “By way of example, the draft indicates that, in order to fulfill its objectives, the Central Bank must consider the protection of employment, but at the same time it must be concerned with caring for the environment. It is not difficult to imagine a scenario in which these principles are in contradiction, and the draft does not indicate which criterion should prevail, ”she warns.

Another point that the experts consider when analyzing the constitutional draft is the approach of greater economic activity of the State and the complete transformation of its financial administration system, by facilitating the creation of public, regional and municipal companies, as well as than the financial autonomy of the regions.

According to Garrigues partner Pedro García, this, if approved, will pose a great challenge in “redesigning the financial legislation of the public sector”.

Although García points out that “there are no apocalyptic considerations” about the text in question, one point to look at will be the effectiveness of the pre-existing rights to the new Constitution (if approved), the one that many investors are monitoring today, and that if they see “that their rights acquired under the previous norm are affected, Chile will no longer be attractive to invest and litigation against the State in international courts would increase”, something that has already slipped in different circles.

Another point of concern is the rights and autonomy of indigenous communities, “which will imply greater restrictions and difficulties for the development of investment projects,” says PPU partner Marcela Silva, who also warns about the inclusion of the category of “goods natural commons”, as there is no clarity on the real scope of the domain limitations that this will imply.

And if it is about great transformations. Experts in financial regulation are closely following the tax and social security reform projects presented by the government of Gabriel Boric due to the effects they may have on economic activity and to maintain investment levels. Another latent concern, they say, is that pension fund withdrawals will be discussed again, which “may be a temptation that is difficult for the authorities to resist” in a context of high inflation and economic slowdown, warns García.

FinTech Law

A different assessment is the one they have about the FinTech Law project, which specialists assure is going in the right direction, of generating a flexible and technologically neutral regulatory framework.

The point to observe, according to Silva, is to achieve “on the one hand, the protection of public interests and protection of financial clients (users, debtors and investors), and on the other, ensure the necessary flexibility to promote the development of this new industry”; that is, “that it does not stop new business or financing alternatives that may arise from the innovation dynamics that these companies have,” adds Monge.

Regarding the concept of “open finance”, for the lawyers consulted, the main challenge is in the implementation of the regulations, derived from the exchange of information of financial clients under cybersecurity and data privacy standards. “The project grants a broad responsibility to the CMF, which must not only supervise the FinTechs and grant the necessary authorizations so that they can operate, but must also dictate a series of regulations necessary for the operation of the law,” said Juan Antonio Parodi, from Cariola Diez Pérez-Cotapos.

From the same study, the lawyer Rodrigo Sepúlveda marks a different point of concern for financial entities.

He points out that one aspect that they are looking at is the CMF’s pending regulations that regulate the commissions of credit operations and money obligations, especially the scope of the conditions and the definition of “commission”, all this due to the ” wide range of banking services associated with said operations, which if considered “interests” would be subject to the maximum limits allowed, relevant tax effects for the parties or possible disputes and controversies with the regulatory entities, in addition to the increase in the cost of said operations and the consequent exclusion of the credit market of riskier potential debtors”, he stated.

The best in Banking and
Finance, according to IFLR 1,000

In the last installment of the IFLR 1,000 ranking in the category of Banking and Finance in Chile, four firms were placed on the podium (level 1): Carey, Claro & Cia, Morales & Besa together with PPU Chile.
Later (level 2) Cariola Diez Pérez Cotapos, Barros & Errázuriz, Garrigues and Guerrero Olivos stood out, while in the next band the recognized ones were Baker & McKenzie, Honorato Delaveau, Prieto, Larraín Asociados, Urenda Rencoret & Dörr together with the former Bofill Mir & Álvarez Jana (recently divided), as well as Alessandri, CMS Chile, Dentons and DLA Piper at the next level, which together with a dozen studios were the ones that obtained the most qualifications to position themselves in this category.

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