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    CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks

    The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system. In addition, CMF published consultation on two new regulatory files related to the implementation of Basel III standards in Chile and another one on the management of debtor information by financial institutions. CMF also issued a statement on its first conference on climate-related financial risks and outlined the roadmap to address climate-related risks.

    Below are the key highlights of the recent updates from CMF:

    • Consultation on Basel rules. As part of implementation of Basel III standards in Chile, the new files R13 and R14 set new information reporting requirements for the monitoring and evaluation of banking book market risks and credit concentration risks, respectively. The regulatory proposal aims to collect necessary information to monitor all relevant banking risks and gather granular data to ensure compliance with adequate management of the market risk banking book and credit concentration risks. Requirements stated in these normative files shall apply to all banks incorporated in Chile as well as the branches of foreign banks operating in the local market. The requested information will be provided at local consolidated, global consolidated, and individual levels for each institution. The files under public consultation are to be submitted to CMF starting on December 2022. The final date will be determined after the public consultation ends. CMF has published a regulatory report that assesses the impact of this proposal and this consultation is open until May 27, 2022.
    • Consultation on management of debtor data. CMF is consulting on a regulatory proposal that aims to improve standards on treatment and usage of data related to debtor information available in the CMF's Registry of Debtors. The regulatory proposal follows the best international practices and requires entities with access to the CMF Debt Registry to develop an Internal Policy for the Security and Management of Debtor Information, which must include the minimum requirements stated in the proposal. The Internal Policy for the Security and Management of Debtor Information must also be updated, approved, and audited at least once per calendar year. The consultation is open until May 20, 2022.
    • Conference on climate-related financial risks. CMF organized its first conference on regulation and supervision of climate-related financial risks, with support from the Inter-American Development Bank, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and the British Embassy in Chile. At the conference, the CMF Deputy Chairman, Mauricio Larraín, presented the roadmap of CMF on climate change and the development of green and sustainable financial markets. In addition, CMF has made available the presentations and other documents from the CMF Conference on Regulation and Supervision of Climate-Related Financial Risks. The Deputy Chair noted that the CMF Board recently approved planning for a second phase of the Climate Change Working Group, which involves activities in the prudential, market conduct, and market development areas as well as in national and international cooperation. He also highlighted that the strategy for change is based on three main pillars: the promotion of climate risk disclosures, the integration of climate risks into the standard risk management framework, and the development of a green financial market.
    • Roadmap to address climate risks. The roadmap presented by the CMF official at the aforementioned conference outlines key activities included under Phase 2. From a prudential point of view, the activities include a mandatory survey of Risks and Opportunities associated with Climate Change among financial institutions within the regulatory perimeter of CMF, Prudential Supervision of Climate Risks Manual, recommendations of Prudential Supervision Practices to introduce climate-related risks into micro-prudential supervision, prudential regulatory recommendations to introduce climate-related risks into the prudential regulatory framework, and new projects in stress testing and use of scenario analysis and data banks.

     

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    Keywords: Americas, Chile, Banking, Basel, Regulatory Capital, Concentration Risk, Market Risk, Credit Risk, Reporting, Climate Change Risk, ESG, Sustainable Finance Strategy, CMF, Headline

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