CMF Amends Rule on Use of Surplus Mortgage Collateral in SME Loans
CMF has published amendments to Chapter B-1 of the Compendium of Accounting Standards to enable the use of excess home mortgage collateral in the standard mortgage portfolio provisioning model as a mitigating factor in the standard group business model. The amended regulation allows financial institutions to use surplus housing mortgage collateral as a safeguard for commercial loans aimed at small and medium enterprises (SMEs). The regulatory proposal on the amendments to Chapter B-1 of Compendium of Accounting Standards was in consultation between April 13, 2020 and April 24, 2020. CMF has also released a regulatory report that evaluates the impact of this regulatory proposal.
Chapter B-1 of the Compendium of Accounting Standards for banks establishes standardized methodologies for calculating credit risk provisions for the home mortgage portfolio and the group commercial portfolio. Currently, these methodologies do not allow the use of mortgage guarantees associated with home loans in determining the debt-guarantee ratio and the computation of the respective provisions in the group commercial portfolio. Considering the effects of the COVID-19 pandemic, CMF has resolved to review the aforementioned restriction, allowing the recognition of the excess of mortgage guarantee associated with home loans in the standard provisioning model of the group commercial portfolio in Chapter B-1.
Related Links
- Press Release (in English)
- Circular on Amendments (PDF in Spanish)
- Resolution N° 2923 (PDF in Spanish)
- Regulatory Treatment of Collateral (PDF in Spanish)
Keywords: Americas, Chile, Banking, COVID-19, Credit Risk, SME, RRE, Residential Real Estate, Basel III, CMF
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