Featured Product

    CMF Consults on Treatment of State Guarantees in Calculation of RWAs

    July 21, 2020

    CMF is consulting on a regulation that would modify the treatment of the State loan guarantees for calculation of risk-weighted assets, or RWAs, by banks. CMF proposes amendments to Chapter 12-1 of the Updated Compilation of Rules for Banks. The amendment will modify the treatment of the amounts guaranteed by the Chilean State, Production Development Corporation (CORFO), and Guarantee Fund for Small Entrepreneurs (FOGAPE). As per the proposed treatment, these amounts would be assigned to Class 2 for the purpose of calculating risk-weighted assets. CMF also published a regulatory report evaluating the impact of the proposal. The consultation period for this regulation closed on July 31, 2020.

    As part of the measures adopted by economic authorities to deal with the impact of COVID-19 outbreak, this modification is expected to increase the core capital indicators of a bank, thus improving the conditions for institutions to transfer liquidity to markets. This also considers the strengthening of the State's role through FOGAPE and other support mechanisms. The new treatment is in line with international standards and is especially important for banks that would not have enough room to use the additional provisions as effective equity. On April 20, 2020, CMF issued a circular (No. 2,250) that allowed banks to consider a proportion (15%) of the amount guaranteed by the Chilean State, CORFO, and FOGAPE to cover loans granted by banks as part of the voluntary provisions that make up the effective equity. The current regulatory proposal voids such treatment and these guarantees can be considered without any limits in the calculation of risk-weighted assets. The proposed amendment would be in effect until December 01, 2021.

     

    Related Links (in English and Spanish)

    Comment Due Date: July 31, 2020

    Keywords: Americas, Chile, Banking, COVID-19, Credit Risk, Basel, Regulatory Capital, Loan Guarantee, FOGAPE, CMF

    Featured Experts
    Related Articles
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6432