CMF Integrates SBIF to Modernize Banking Legislation in Chile

By Regulatory News

June 06, 2019

Basel III

CMF held a meeting on the supervision and regulation of banking and financial institutions, in accordance with the provisions of Law 21.130, which modernizes banking legislation, and announced integration of SBIF into CMF. Implementation of the Basel III rules is one of the main challenges that CMF will face when adding banks within its supervisory perimeter. Additionally, CMF informed that it will start a new process for the hiring of a consultancy for the design and implementation of the Phase II of administrative integration, after the incorporation of the SBIF to CMF.

The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

Related Links

Effective Date: June 18, 2019

Press Release

Proposed Rule 1

Proposed Rule 2

Proposed Rule 3

Presentation on Regulatory Framework (PDF)

Presentation on Resolution Plan Rules (PDF)

CMF will supervise 73% of the financial assets of the country and will have under its control perimeter almost eight thousand entities belonging to the securities markets, insurance, banks, and other financial institutions. The integration of banking supervision into CMF will have the following advantages:

Extend the advantages of an autonomous and collegial corporate governance toward supervision of banks and of other financial institutions supervised by SBIF
Expand the regulatory perimeter facilitating a systemic vision of the market and the supervision of financial conglomerates
Ensure consistency in the regulation of risks between different entities and expand regulatory transparency through public consultation of standards, regulatory impact reports, and better regulatory coordination
Expand the base for development and efficient use of specialized knowledge
Leverage available resources to strengthen the scope of supervision and take advantage of synergies, in addition to reducing costs of coordination and information exchange among regulators
Improve the process of accountability, with a clear mandate to the market and with a clear assignment of functions within the entity

Related Links (in Spanish)

Keywords: Americas, Chile, Banking, Insurance, Securities, Basel III, Modernized Banking Legislation, SBIF, CMF

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CMF Integrates SBIF to Modernize Banking Legislation in Chile

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