CMF is consulting on a regulation that establishes a standardized methodology for determining the risk-weighted assets for market risk at banks. The regulation aims to improve internal capital management and risk coverage in the banking industry, in line with international standards and the recent amendment to the General Banking Act (LGB). CMF also published a regulatory report evaluating the impact of the proposal, along with a set of frequently asked questions and a presentation on the proposal. The consultation process will be open until August 31, 2020.
The new regulation in consultation is based on the Basel III simplified standard model for market risk management, which includes four types of risk—interest rates, foreign currencies, stock prices, and commodities. This consolidated approach considers the risk of stock prices and raw materials due to possible exposures that a bank's subsidiaries may have in such assets. Furthermore, a specific risk oriented to measure idiosyncratic aspects of the issuer is incorporated within the interest rate and stock exchange risks. All parameters presented in the standard in consultation were calibrated using updated information (1999-2018 for foreign currency risk and 2007-2018 for interest rate risk).
In March 2020, CMF had decided to postpone the implementation of Basel III requirements by one year and to maintain the current general regulatory framework for banking capital requirements until December 2021. CMF is postponing the implementation of the internal methodologies for measuring market risk-weighted assets to a date after the entry into force of these standards in the member countries of the Basel Committee (scheduled in January 2022). This is because CMF is expecting that international experience will be gained from the application of these methodologies in jurisdictions with more developed markets as well as from gradually implementing the new standards in Chile.
The General Banking Act empowers CMF to establish, through a general regulation and subject to a favorable agreement by the Central Bank of Chile, standardized methodologies to determine risk-weighted assets of banking companies. This measure covers relevant risks faced by such companies, including credit risk, market risk, and operational risk. Prior to the amendment to the General Banking Act in 2019, the calculation of risk-weighted assets for the determination of banks' capital requirements considered only the credit risk component. Market risk was managed through an exposure limit, whose estimation methodology is set in Chapter III.B.2.2 of the Compendium of Financial Regulation of the Central Bank of Chile.
Comment Due Date: August 31, 2020
Keywords: Americas, Chile, Banking, Basel, Market Risk, Risk-Weighted Assets, General Banking Act, Regulatory Capital, Central Bank of Chile, CMF
Previous ArticleBoM Joins NGFS and Publishes Financial Stability Report
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.