Featured Product

    CMF Proposes Rules on Credit Risk-Weighted Assets and Capital Buffers

    January 27, 2020

    CMF is consulting on two new regulations: one regulation covers the methodology for determining credit risk-weighted assets while the other one relates to the assessment of compliance with capital buffers. These regulations are in context of the adoption of Basel III standards by local banks. The consultation on methodology for determining credit risk-weighted assets ends on April 15, 2020 while the one on assessment of compliance with capital buffers ends on March 31, 2020. The new regulations will become effective on December 01, 2020. Additionally, CMF has published regulatory reports evaluating the impact of these proposals, frequently asked questions, and presentations on the mentioned regulatory proposals.

    Consultation on Methodology for Determining Credit Risk-Weighted Assets. In accordance with Article 67 of the General Banking Act, the regulatory proposal presents a standard methodology and principles for the use of internal methodologies to determine credit risk-weighted assets by banks operating in Chile. The current mechanism estimates credit risk-weighted assets using a methodology in the Basel I standard. The current methodology distinguishes only five categories of assets and does not allow the use of internal methodologies or techniques to mitigate exposure by collaterals or qualified guarantors. In contrast, the standardized approach proposed with the Basel III standards is more risk-sensitive, as it has categories that depend on the type of counterparty and different risk factors. The new framework will also allow the use of internal methodologies subject to the fulfillment of minimum requirements. The standard under consultation also proposes the possibility of reducing credit risk-weighted assets by considering the credit risk mitigants such as netting agreements, guarantors, collaterals, financial guarantees, and balance-sheet compensations.

    Consultation on Assessment of Compliance with Capital Buffers. CMF has published a regulatory proposal for the assessment of compliance with capital buffers, in accordance with certain articles of the General Banking Act and the latest agreement of BCBS. According to the regulatory proposal, the capital conservation buffer (CCB) is a fixed amount equivalent to 2.5% of the risk-weighted assets, after excluding mandatory provisions. Although the CCB is of a permanent nature, it is expected to be used when the bank faces the materialization of idiosyncratic or systemic risks, thus avoiding default and credit supply contraction. Meanwhile, the countercyclical buffer (CCyB) is a variable amount ranging from 0% to 2.5% of the net risk-weighted assets after excluding mandatory provisions. The implementation of the regulation considers a four-year transition period. From December 01, 2021, the maximum value of both the conservation buffer and CCyB will be 0.625% each. The threshold will be raised by the same amount in 2022, until reaching full implementation in 2024.

     

    Related Links

    Comment Due Date: April 15, 2020/March 31, 2020

    Effective Date: December 01, 2020

    Keywords: Americas, Chile, Banking, Credit Risk, Risk-Weighted Assets, Capital Buffer, CCyB, Basel III, Standardized Approach, Minimum Requirements, CCB, CMF

    Featured Experts
    Related Articles
    News

    PRA and FPC Finalize Changes to Leverage Ratio Framework in UK

    The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA

    October 08, 2021 WebPage Regulatory News
    News

    CFPB Proposes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.

    October 08, 2021 WebPage Regulatory News
    News

    PRA Decides to Maintain O-SII Buffers for Another Year

    The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.

    October 08, 2021 WebPage Regulatory News
    News

    FSB Report Assesses Implementation of Recommendations on Stablecoins

    The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.

    October 07, 2021 WebPage Regulatory News
    News

    APRA Updates Loan Serviceability Expectations for Home Lending

    In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.

    October 06, 2021 WebPage Regulatory News
    News

    CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.

    October 06, 2021 WebPage Regulatory News
    News

    EBA and EIOPA Set Out Work Priorities for 2022

    The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.

    October 05, 2021 WebPage Regulatory News
    News

    MFSA Issues Reporting Updates and Guidance for Banks

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.

    October 05, 2021 WebPage Regulatory News
    News

    EC Publishes Decision on List of Equivalent Third Countries Under CRR

    The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).

    October 04, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write-Down and Conversion Powers

    EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.

    October 04, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7552