The Central Bank of Chile has issued a new regulatory framework for sale-and-repurchase and purchase-and-resale (repo) transactions, updating its Compendium of Financial Norms to provide legal certainty for netting of reciprocal repo positions when a counterparty enters insolvency or restructuring proceedings. The rules extend to repos a netting treatment similar to that already applied to derivatives and introduce financial-stability safeguards aimed at avoiding abrupt contract close-outs that could impair system liquidity. The framework is set out in Chapter III.D.2 and is issued under powers granted by the Resilience Law (Law 21.641). It applies only to repos documented under master agreements recognised by the Central Bank of Chile, listed in Annex 1 and currently limited to internationally widely used templates, with scope to recognise additional local or international agreements if submitted for recognition. The chapter follows a public consultation held from 18 July to 17 August, with received comments summarised in an accompanying explanatory note.
Central Bank of Chile2025-12-19
Central Bank of Chile issues new repo framework to support insolvency netting and recognise eligible master agreements
The Central Bank of Chile updated its Compendium of Financial Norms to include a new regulatory framework for sale-and-repurchase and purchase-and-resale (repo) transactions. This framework ensures legal certainty for netting reciprocal repo positions during counterparty insolvency or restructuring, similar to derivatives, and introduces safeguards to maintain system liquidity. It applies to repos under master agreements recognised by the Central Bank, with potential for additional agreements to be recognised.