Chile Financial Market Commission consults on Basel III market risk capital revisions including a cut in the vertical adjustment to 7 percent

The Chile Financial Market Commission (CMF) launched a five-week consultation on amendments to Chapter 21-7 of the Updated Compilation of Banking Regulations to better align market risk capital requirements with banks’ risk profiles by refining the calculation of Market Risk-Weighted Assets (MRWA). The package is estimated to reduce MRWA across the system by around 23 percent and is proposed to take effect from July 2026. The proposal recalibrates the vertical adjustment parameter to reflect local market characteristics, reducing it from 10 percent to 7 percent based on calibration results for basis and gap risks. It also updates the guidelines for interest rate risk estimation by excluding derivatives and allowing full offsetting of matched derivative positions even when they are not strictly identical, in line with Basel standards. CMF expects the changes to produce a short-term reduction in capital requirements and to narrow the gap between the risk-weighted asset density of Chilean banks and that in other jurisdictions. The consultation forms part of CMF’s ongoing Basel III implementation review and sits within a medium-term plan to assess more sophisticated methodologies for calculating MRWA. A regulatory report accompanies the draft amendments, setting out key elements and the impact assessment.