Featured Product

    CMF Amends Treatment of State Guarantees for Calculation of RWAs

    August 24, 2020

    CMF published a regulation that modifies the treatment of State Guarantees for the calculation of risk-weighted assets, or RWAs, of banks. To this end, CMF published amendments to Chapter 12-1 of the Updated Compilation of Rules for Banks. The modified treatment applies to the amounts guaranteed by the Chilean State, the Production Development Corporation (CORFO), and the Guarantee Fund for Small Entrepreneurs (FOGAPE). As per the revised treatment, these amounts are incorporated into category 2 of the risk-weighted asset classification, which consequently passes from having a weighting for credit risk from 100% to 10%. CMF consulted on these amendments in July 2020.

    As part of the measures adopted by economic authorities to deal with the impact of COVID-19 outbreak, this modification is expected to increase the core capital indicators of banks, thus improving the conditions for institutions to transfer liquidity to markets. The new treatment is in line with the international standards and is especially important for banks that would not have enough room to use the additional provisions as effective equity. On April 20, 2020, CMF issued a circular (No. 2,250) that allowed banks to consider a proportion (15%) of the amount guaranteed by the Chilean State, CORFO, and FOGAPE to cover loans granted by banks as part of the voluntary provisions that make up the effective equity. The current regulation voids such treatment and these guarantees can be considered without any limits in the calculation of risk-weighted assets.

     

    Related Links (in Spanish and English)

    Keywords: Americas, Chile, Banking, COVID-19, Credit Risk, Basel, Regulatory Capital, State Guarantee, FOGAPE, Risk-Weighted Assets, CMF

    Featured Experts
    Related Articles
    News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News
    News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News
    News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News
    News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News
    News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News
    News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News
    News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News
    News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News
    News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806