Featured Product

    CMF Announces Measures to Address Impact of COVID-19 Outbreak

    April 13, 2020

    CMF is consulting on supplementary instructions in Chapter B-1 of the Compendium of Accounting Standards. Chapter B-1 of the Compendium of Accounting Standards defines the criteria and guidelines for calculating provisions for credit risk. The instructions allow for the use of excess mortgage guarantees from the portfolio's standard provisioning model as a mitigating factor in the standard business group model. The consultation process will be open until April 24, 2020. Additionally, CMF announced transitional measures for the treatment of provisions to facilitate the flow of credit to households and businesses, in an effort to mitigate the impact of the shock on the economy due to the spread of COVID-19.

    Consultation on Supplementary Instructions

    The standard model for calculating provisions of the commercial group portfolio came into force in June 2019. It constitutes a prudential floor for internal methods that have not been expressly approved by CMF, as had been previously done with the standard model for the mortgage portfolio. Its design was driven by a balance between risk sensitivity and simplicity, so it did not consider the cross use of mortgage guarantees. The impact of such exclusion versus the recalibration costs for the different portfolios was then estimated to be low, especially in view of the imminent approval of amendments to the General Banking Act which would change the methodology for classifying credit portfolios under the Basel III framework.

    On March 23, 2020, CMF announced a package of measures to facilitate the flow of credit to businesses and households, including the use of excess mortgage guarantees to safeguard commercial loans to small and medium enterprises. This measure aims to facilitate the flow of credit to businesses and mitigate the effects of the COVID-19 pandemic on the financial system. The instructions in consultation satisfies the commitment made and it is expected to be accompanied by similar efforts from the banking industry.

    Transitional Measures

    The special treatment provided by CMF avoids the inclusion of further provisions due to non-payments of the installments associated with the granted easements. This will facilitate the rescheduling conditions offered by banks to their customers. The exceptional treatment will be in force until July 31, 2020 and considers freezing provisions in the following situations:

    • Mortgage Loans—The maximum grace or installments deferment period will be six months for debtors who are up to date or in arrears for no more than 30 days within the indicated validity period.
    • Commercial Loans—The maximum grace or deferment period will be four months for debtors who are up to date or in arrears for no more than 30 days or one installment within the indicated validity period.
    • Consumer Loans—The maximum grace or deferment period will be three months for debtors who are up to date or in arrears for no more than 30 days within the indicated validity period.

    Additionally, CMF adopted measures following permanent monitoring of the effects of COVID-19 and the impact it may have on its supervised entities.

    • Operational continuity plans—CMF has requested its supervised entities, including banks and support companies of banking activities; insurance companies; fund managers; securities and product intermediaries; and financial market infrastructures, to apply their contingency plans in a timely manner. Said plans include the deployment of business continuity measures necessary to guarantee operational continuity pursuant to their regulatory obligations and the proper service of its customers, depositors, investors, policyholders, or participants.
    • Disclosure of information to the market—CMF has required issuers of publicly offered securities to disclose as soon as possible any significant information on financial and operational effects that the outbreak of COVID-19 could mean, including measures taken to mitigate such effects. This is pursuant to transparency requirements imposed on them by the Securities Market Law and CMF regulations.
    • Third-party fund administrators and securities intermediaries—These entities were instructed to continue applying risk management frameworks required by the regulations in force. Therefore, they can timely meet the requirements of investors or participants in the funds under their management.
    • Measures related to CMF operation—Under the operational continuity plan of CMF, appropriate measures are in place to ensure the continuity of its functions and the services it provides to citizens and financial actors. 

     

    Related Links

    Comment Due Date: April 24, 2020

    Keywords: Americas, Chile, Banking, COVID-19, Basel III, Credit Risk, Supplemental Instructions, Mortgage, CMF

    Featured Experts
    Related Articles
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697