CMF Sets Out Workplan for Implementation of Fintech Law
The Commission for the Financial Market (CMF) in Chile has set out its workplan for implementation of the Fintech Law as well as extended the consultation period, until December 31, 2022, on the standardized methodology for calculating loan provisions and contingent consumer loans granted by banking institutions established in Chile. Additionally, CMF has eliminated the additional effective equity requirements, under article 35bis of the General Banking Law, in line with the adoption of the new Basel III standards as of December 2022. The additional requirements, in force since 2000, indicate that, after inorganic growth (for example, mergers and acquisitions), the resulting institutions that achieve participation in placements greater than 15% will have higher effective equity requirements.
Fintech Law. The CMF Council met with the representatives of supervised industries and fintech unions, with the aim of publicizing the work plan on the regulatory process for the implementation of the Fintech Law. The Fintech Law establishes a flexible regulatory framework for financial services firms, such as crowdfunding platforms, transaction platforms and custodians of financial instruments, and brokerage and order routing companies, that are not regulated or supervised by CMF. The Fintech Law consists of regulations on registration, authorization, accreditation, public information standards, risk management, and patrimonial requirements and guarantees, among others. CMF also announced that the process related to the regulations on new open finance scheme will begin in the second quarter of 2023, which includes regulations on supervision perimeter, registration, cybersecurity requirements, and consent and authentication. Regulatory work related to payment initiation services is also slated to begin in the second quarter of 2023.
Consultation on Methodology for Consumer Loans. The consultation aims to introduce a standard method of provisioning for consumer loans in Chapter B-1 of the Compendium of Accounting Standards for banks. As for the other portfolios, the regulation establishes matrices to determine the probability of default (PD) and the loss-given default (LGD) used to calculate the level of provisions. This methodology follows the best international practices and is consistent with the rest of the regulatory provisions related to the determination of capital requirements for credit risk. It also considers risk factors allowing a timely recognition of credit risk as well as generating incentives to manage it prudently and strengthen the stability of the banking system.
Related Links (in Spanish)
- Press Release on Fintech Law
- Consultation on Methodology for Consumer Loans
- Press Release on Equity Requirements
Keywords: Americas, Chile, Banking, Fintech Law, Regtech, Open Finance, Crowdfunding, Lending, Credit Risk, Consumer Loans, Probability Of Default, Loss Given Default, Basel, Regulatory Capital, CMF
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