Chile parliament moves to ban compound interest in banking
Deputy Héctor Ulloa introduced a legislative amendment to prohibit anatocism – the practice of charging interest on interest – as part of a broader reform package. The Chilean Chamber of Deputies approved the amendment by a vote of 79, and the Senate subsequently ratified it. The Central Bank of Chile broke with its usual prudence to warn that the measure would undermine basic economic principles, raise simple interest rates, and erode savings returns for households and small businesses. The executive branch is preparing a presidential veto, arguing that the ban would not lower credit costs but would instead shift the burden to borrowers and savers. No other country has enacted a law banning compound interest, making the proposal unprecedented.
Analysts note that eliminating the capitalisation of interest would force financial institutions to redesign products, likely leading to higher loan rates, stricter lending conditions, and reduced access to credit for vulnerable sectors. The debate highlights the tension between consumer protection goals and the economic realities of credit markets.
Entities: Central Bank of Chile · Héctor Ulloa · President of Chile
Claims
What the coverage asserts, and how well corroborated each claim is across sources.
- [● 4 SOURCES] The President of Chile is preparing a veto against the compound interest ban. (multiple articles)
- [● 4 SOURCES] No other country has enacted a law prohibiting compound interest. (multiple articles)
- [● 4 SOURCES] The ban would reduce returns on savings and deposits for households and small businesses. (multiple articles)
- [● 4 SOURCES] The Central Bank of Chile warned that the ban would be harmful and broke its usual prudence to do so. (multiple articles)
- [● 4 SOURCES] The proposal seeks to prohibit anatocism, the charging of interest on interest. (multiple articles)
- [● 4 SOURCES] The Chilean Chamber of Deputies approved the amendment to prohibit compound interest by a vote of 79. (multiple articles)
- [● 4 SOURCES] The Chilean Senate ratified the proposal to ban compound interest. (multiple articles)
- [● 4 SOURCES] Banning compound interest would likely cause lenders to raise simple interest rates, increasing costs for borrowers. (multiple articles)