Featured Product

    CMF Announces Measures to Address Impact of COVID-19 Outbreak

    April 13, 2020

    CMF is consulting on supplementary instructions in Chapter B-1 of the Compendium of Accounting Standards. Chapter B-1 of the Compendium of Accounting Standards defines the criteria and guidelines for calculating provisions for credit risk. The instructions allow for the use of excess mortgage guarantees from the portfolio's standard provisioning model as a mitigating factor in the standard business group model. The consultation process will be open until April 24, 2020. Additionally, CMF announced transitional measures for the treatment of provisions to facilitate the flow of credit to households and businesses, in an effort to mitigate the impact of the shock on the economy due to the spread of COVID-19.

    Consultation on Supplementary Instructions

    The standard model for calculating provisions of the commercial group portfolio came into force in June 2019. It constitutes a prudential floor for internal methods that have not been expressly approved by CMF, as had been previously done with the standard model for the mortgage portfolio. Its design was driven by a balance between risk sensitivity and simplicity, so it did not consider the cross use of mortgage guarantees. The impact of such exclusion versus the recalibration costs for the different portfolios was then estimated to be low, especially in view of the imminent approval of amendments to the General Banking Act which would change the methodology for classifying credit portfolios under the Basel III framework.

    On March 23, 2020, CMF announced a package of measures to facilitate the flow of credit to businesses and households, including the use of excess mortgage guarantees to safeguard commercial loans to small and medium enterprises. This measure aims to facilitate the flow of credit to businesses and mitigate the effects of the COVID-19 pandemic on the financial system. The instructions in consultation satisfies the commitment made and it is expected to be accompanied by similar efforts from the banking industry.

    Transitional Measures

    The special treatment provided by CMF avoids the inclusion of further provisions due to non-payments of the installments associated with the granted easements. This will facilitate the rescheduling conditions offered by banks to their customers. The exceptional treatment will be in force until July 31, 2020 and considers freezing provisions in the following situations:

    • Mortgage Loans—The maximum grace or installments deferment period will be six months for debtors who are up to date or in arrears for no more than 30 days within the indicated validity period.
    • Commercial Loans—The maximum grace or deferment period will be four months for debtors who are up to date or in arrears for no more than 30 days or one installment within the indicated validity period.
    • Consumer Loans—The maximum grace or deferment period will be three months for debtors who are up to date or in arrears for no more than 30 days within the indicated validity period.

    Additionally, CMF adopted measures following permanent monitoring of the effects of COVID-19 and the impact it may have on its supervised entities.

    • Operational continuity plans—CMF has requested its supervised entities, including banks and support companies of banking activities; insurance companies; fund managers; securities and product intermediaries; and financial market infrastructures, to apply their contingency plans in a timely manner. Said plans include the deployment of business continuity measures necessary to guarantee operational continuity pursuant to their regulatory obligations and the proper service of its customers, depositors, investors, policyholders, or participants.
    • Disclosure of information to the market—CMF has required issuers of publicly offered securities to disclose as soon as possible any significant information on financial and operational effects that the outbreak of COVID-19 could mean, including measures taken to mitigate such effects. This is pursuant to transparency requirements imposed on them by the Securities Market Law and CMF regulations.
    • Third-party fund administrators and securities intermediaries—These entities were instructed to continue applying risk management frameworks required by the regulations in force. Therefore, they can timely meet the requirements of investors or participants in the funds under their management.
    • Measures related to CMF operation—Under the operational continuity plan of CMF, appropriate measures are in place to ensure the continuity of its functions and the services it provides to citizens and financial actors. 

     

    Related Links

    Comment Due Date: April 24, 2020

    Keywords: Americas, Chile, Banking, COVID-19, Basel III, Credit Risk, Supplemental Instructions, Mortgage, CMF

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News
    News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News
    News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News
    News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206