Chile Financial Market Commission consults on banking rule changes to facilitate repos and self-securitisations and recognise insurance and derivatives as credit risk mitigants

The Chile Financial Market Commission has published for consultation a package of amendments to banking regulations intended to remove regulatory frictions that limit the development of liquidity-provision and liquidity-management instruments. The proposal targets the treatment of repurchase agreements, self-securitisations, and the recognition of loan insurance and derivatives in risk-based capital requirements, framed as part of ongoing Basel III implementation in Chile. For repos, the draft would simplify and clarify the applicable regulatory treatment and would deem conditions for risk weights below 20 percent to be met for transactions conducted under a framework agreement recognised by the Central Bank of Chile, as well as for trades cleared and settled through central counterparties recognised by the CMF. For self-securitisations, it would remove disincentives by eliminating the 1,250 percent treatment applied to bank-retained series, allowing compensation in individual balance sheets, and enabling proper registration in the CMF’s Securities Registry. The proposal also sets conditions under which loan insurance and derivatives may be treated as credit risk mitigators for Basel-aligned capital requirements, with the CMF expecting limited immediate balance-sheet impact but incentives for deeper markets, consistent with the International Monetary Fund’s 2021 Financial Sector Assessment Program recommendations. The CMF has made the consultation materials and an accompanying regulatory report available via its “Regulations Under Consultation” webpage.