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

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858