Chile Financial Market Commission backs Basel III internal credit risk models and plans 2026 validation team

In a presentation by Chairwoman Catherine Tornel at a CLAPES UC seminar, the Chile Financial Market Commission set out priorities across its prudential, conduct and market development mandates and announced it will promote banks’ development of Basel III internal models for credit risk as an alternative to the standardized approach, subject to prior CMF validation. Banks that opt in would move to using their own credit risk models, while the CMF builds capability to assess and approve them. The CMF expects additional resources in 2026 to create a specialised internal-model validation team. CMF estimates put the current average risk-weighted asset ratio under the standardized model at 67 percent, with internal models potentially reducing the average to 53 percent, equating to around USD 10 billion in capital savings and a 375 basis point uplift in capital adequacy. Tornel also highlighted the need for ex-ante and ex-post cost-benefit assessment of regulation and described conduct-supervision priorities such as market intelligence to detect risks and behaviours early, risk-based supervision and ongoing engagement with supervised firms. The CMF plans to publish a document in the first half of 2026 setting out work undertaken under its Market Development Mandate.