CMF Issues Rule for Identification of Systemically Important Banks
CMF issued a regulation for the identification of systemically important banks and the determination of additional requirements for these institutions, in accordance with the international standards and the General Banking Act (LGB). To this end, CMF has incorporated Chapter 21-11 to the Updated Compilation of Rules for Banks (RAN) and has amended Chapter 12-14 of RAN. This is the fifth regulation issued by CMF according to its schedule to implement Basel III standards in Chile. CMF also published a regulatory report evaluating the impact of the regulation, along with a set of frequently asked questions (FAQ) and presentations on the regulation. The regulation will come into force on December 01, 2020.
The new regulation considers establishing a Systemic Importance Index by entity, based on four factors that reflect the local impact of its financial deterioration or potential insolvency. These factors are size, interconnection, substitutability, and complexity of the entity. Depending on the value of this index, a range is established for additional requirements according to the General Banking Act. The process of identifying systemic banks and determining the additional requirements applicable will be carried out annually. It will be based on the information to be reported by the banks for calculating the Systemic Importance Index. With information as of the end of 2019, it is estimated that six banks would be classified as systemically important and, together, they would require additional core capital of nearly USD 1.25 billion.
The results of the process of identifying systemically important banks, and their additional requirements, will be informed through a well-founded resolution with prior agreement of the Central Bank of Chile, as of March 2021. The additional requirements derived from the first application may be constituted gradually, beginning in December 2021 and ending in December 2025 at a rate of an additional 25% per year. Furthermore, interested parties can comment on the measurement file of the systemic importance index to December 02, 2020. Once the fields have been adjusted and published in the Information Systems Manual, all banks must send the information monthly to CMF within the stated timeframes. Until March 01, 2021, banks must send monthly information corresponding to 2020 for the first identification of systemically important banks.
Related Links (in English and Spanish)
Effective Date: December 01, 2020
Keywords: Americas, Chile, Banking, Basel, Systemic Risk, General Banking Act, Systemically Important Bank, Regulatory Capital, CMF
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
Central Bank of Bahamas Consults on Application of Basel FrameworkRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.