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    CMF Adopts Twin Peaks Regulatory Model, Proposes Large Exposure Rules

    November 09, 2020

    CMF approved Resolution No. 4.694 that establishes the transition to a new organizational structure for the supervisory and regulatory areas of CMF. The transition process will begin on January 01, 2021 and end in December 2021. The new "Twin Peaks" regulatory model will be based on two pillars: prudential and market conduct. For the prudential pillar, two new Directorates will be created, one for prudential supervision and the other for prudential regulation. In another development, CMF proposed rules and guidelines as part of the large exposures regime to control the concentration risk at banks, with the consultation period ending on December 20, 2020.

    As part of the consultation with respect to the large exposures regime, CMF issued a regulatory proposal to systematize the limit control that banks must comply with when granting financing to corporate groups. The last amendment to Article 84 No. 1 of the General Banking Act, in force since January 12, 2019, sets a limit of 30% of the effective assets of the creditor bank for the total of loans granted to individuals or entities belonging to the same corporate group. This is in accordance with the definition set forth in Article 96 of Law No. 18.045. The regulation proposed for this limit to corporate groups is based on, and considers, the remaining limits stated in Article 84 for individual debtors and related entities. It complements and uses the definitions already stipulated for them in Chapter 12-3 of the Updated Compilation of Rules for Banks. Furthermore, it envisions a file with information to control said limit, which will soon be published for consultation as well. 

    This consultation report describes the regulations that will allow effective control of this limit, along with the general guidelines for establishment of corporate groups, measurement of exposures, and submission of information to the regulator. The proposal considers the incorporation of a new Chapter to section 12 of the Updated Compilation of Standards (hereinafter RAN) that clarifies and details the way measurement of the limit established in the seventh paragraph of No. 1 of Article 84, together with provide guidelines for the formation of business groups, positioning themselves to These proposals consider the provisions in the large exposures framework of BCBS and the progress in the adoption of best practices at the international level.

     

    Related Links (in Spanish)

    Comment Due Date: December 20, 2020

    Keywords: Americas, Chile, Banking, General Banking Act, Banking Supervision, Large Exposures, Concentration Risk, Credit Risk, Regulatory Capital, Basel, CMF

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