CMF Adopts Twin Peaks Regulatory Model, Proposes Large Exposure Rules
CMF approved Resolution No. 4.694 that establishes the transition to a new organizational structure for the supervisory and regulatory areas of CMF. The transition process will begin on January 01, 2021 and end in December 2021. The new "Twin Peaks" regulatory model will be based on two pillars: prudential and market conduct. For the prudential pillar, two new Directorates will be created, one for prudential supervision and the other for prudential regulation. In another development, CMF proposed rules and guidelines as part of the large exposures regime to control the concentration risk at banks, with the consultation period ending on December 20, 2020.
As part of the consultation with respect to the large exposures regime, CMF issued a regulatory proposal to systematize the limit control that banks must comply with when granting financing to corporate groups. The last amendment to Article 84 No. 1 of the General Banking Act, in force since January 12, 2019, sets a limit of 30% of the effective assets of the creditor bank for the total of loans granted to individuals or entities belonging to the same corporate group. This is in accordance with the definition set forth in Article 96 of Law No. 18.045. The regulation proposed for this limit to corporate groups is based on, and considers, the remaining limits stated in Article 84 for individual debtors and related entities. It complements and uses the definitions already stipulated for them in Chapter 12-3 of the Updated Compilation of Rules for Banks. Furthermore, it envisions a file with information to control said limit, which will soon be published for consultation as well.
This consultation report describes the regulations that will allow effective control of this limit, along with the general guidelines for establishment of corporate groups, measurement of exposures, and submission of information to the regulator. The proposal considers the incorporation of a new Chapter to section 12 of the Updated Compilation of Standards (hereinafter RAN) that clarifies and details the way measurement of the limit established in the seventh paragraph of No. 1 of Article 84, together with provide guidelines for the formation of business groups, positioning themselves to These proposals consider the provisions in the large exposures framework of BCBS and the progress in the adoption of best practices at the international level.
Related Links (in Spanish)
- New Organizational Structure
- Press Release on Large Exposures Consultation
- Explanatory Note (PDF)
- Consultation Paper (PDF)
Comment Due Date: December 20, 2020
Keywords: Americas, Chile, Banking, General Banking Act, Banking Supervision, Large Exposures, Concentration Risk, Credit Risk, Regulatory Capital, Basel, 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.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
BoE Corrects Validation Rules for Branch Return FormRelated Articles
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
