CMF Updates Address Prudential Rules and Implementation of Fintech Act

CMF published regulation on the implementation of additional liquidity requirements in line with the liquidity risk management principles and the Internal Capital Adequacy Assessment Process under the Basel framework. The regulation introduces the new Chapter 21-14 to the Updated Collection of Standards (RAN) of CMF, which focus on two processes: One is the Internal Liquidity Adequacy Assessment Process (ILAAP), in which the banks themselves will determine the level of liquidity adequacy necessary to cover the dimensions of liquidity risk, over a horizon of at least one year. The second process is the CMF assessment of the liquidity adequacy of banks, with the aim to support their liquidity risk profile, as determined in the annual supervisory review process. The regulations will take effect from April 2023, when banks must send the first Liquidity Self-Assessment Report (IAL) in simplified format while the full report will be required in April 2025. Before that date, the IAL will be based exclusively on the financing planning carried out by banks for different short-term scenarios, provided by CMF, and on their own internal estimates.

Additionally, CMF is seeking comments, until July 31, 2023, on a paper that describes the main legal and regulatory gaps in the resolution framework and bank settlement and develops a proposal to address the identified gaps via future legal amendments. It also includes core elements of the financial safety net, such as the deposit insurance mechanism and the tools and powers of the resolution authority. The document summarizes the results of the internal discussion and analysis conducted between 2020 and 2022 as part of its strategic initiatives, which in turn responds to the recommendations of the evaluation of the financial system, conducted by the IMF and the World Bank (under the Financial Sector Assessment Program or FSAP).

Finally, the Fintech Act, which requires issuance of over 70 regulations over the next 18 months, becomes effective on February 03, 2023. The Fintech Act regulates a set of new financial services arising from intensive adoption of new technologies, including crowdfunding platforms, alternative transaction systems, order routers, and intermediation of financial instruments. In addition, the Act regulates the secondary market of certain recently developed financial instruments, like cryptocurrencies and tokens, maintaining the principle of technological neutrality to the provision of services, and recognizing many of them can be performed by computer algorithms, as is the case of investment- and loan-related advice. This Act amends the General Banking Act, the Insurance Law, and the Law on the Securities Market to promote competition in the financial industry, provide a level playing field for all participating players, and raise customer service standards. It also creates the Open Finance System and establishes rules that mandate certain service providers to share customer information with their consent to receive better offers of financial services and products. Information sharing will be carried out according to strict standards of personal data protection and under security requirements defined by CMF, which providers must comply with in to exchange this information.

Related Links (in Spanish)

• Press Release on Liquidity Rules
• Resolution on Liquidity Rules (PDF)
• Paper on Resolution Framework Gaps
• Implementation of Fintech Act