Featured Product

    CMF Proposes Methodology to Determine Operational Risk-Weighted Assets

    September 13, 2019

    CMF proposed a standardized methodology for the determination of operational risk-weighted assets (APRO) of banking entities operating in Chile, in accordance with the latest international standard (Basel III) and the recent modification of the General Banking Law. CMF also published a report that evaluates the impact of this proposal, the frequently asked questions on this proposal, and a presentation that summarizes the key elements of the consultation on the methodology for determining risk-weighted assets. The consultation ends on October 25, 2019.

    The proposed regulatory standard computes the assets weighted by operational risk from two components. The first component is a business indicator and the second component is an adjustment factor based on the operational losses made in the last 10 years. Prior to the last modification of the General Banking Law, the computation of risk-weighted assets for the determination of the capital requirements of a bank, contained in Article 66, considered only credit risk. The consideration of operational risk in determining the risk-weighted assets of banking companies will contribute to better coverage of the risks that these institutions face as well as to adequate internal capital management.

    The current General Banking Law mandates CMF to establish standardized methodologies for determining the risk-weighted assets of banks, by means of a general rule, with the prior favorable agreement of the Council of the Central Bank of Chile. As per the current practice, CMF may also authorize banks to use their own methodologies to determine risk-weighted assets. However, the Basel III standard of BCBS proposes a single standard method and does not support the use of proprietary methodologies for the calculation of assets weighted by operational risk, which is why such methodologies have not been included in the proposed regulatory framework. BCBS defines operational risk as the risk of suffering losses due to inadequacy or failures in internal processes, personnel, and internal systems or due to external events. Operational risks include internal and external fraud, cyber-security gaps, problems in the employment relationship, system failures, damage to material assets, and bad business practices.

     

    Related Links (in Spanish)

    Comment Due Date: October 25, 2019

    Keywords: Americas, Chile, Banking, Basel III, Operational Risk, Risk-weighted Assets, General Banking Law, FAQ, Standardized Approach, CMF

    Featured Experts
    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417