CHL CMF Counter-Cyclical Capital


On May 24, CHL CMF counter-cyclical capital requirement per Basel III


  • CHL CMF informed on a new milestone in the implementation of the Basel III framework, with the activation of the counter-cyclical capital requirement (RCC).
  • RCC Implementation Overview
  • On May 23rd, the CHL CB decided to activate the RCC as a precautionary measure.
  • Using RCC as a resilience tool in the face of greater external financial uncertainty.
  • Buffer must be established within 1 year and added in solvency reports of May 2024.
  • RCC Requirement Highlights
  • In accordance with Article 66 of the General Banking Law, the RCC can be activated in an amount between 0% and 2.5% of risk-weighted assets of each banking institution.
  • This decision belongs to the CHL CB, with prior favorable report of the CMF.
  • Yesterday, at the Financial Policy Meeting (RPF) for the first half of 2023, the CHL CB Council agreed to activate the RCC at a level of 0.5% of risk-weighted assets (RWAs).
  • RWAs payable in 1 year, considering prior unanimous favorable report of the CMF.T
  • The purpose of the RCC requirement is to accumulate a capital buffer.
  • Such capital buffer would be available in the event of severe stress scenarios.
  • In cases in which they materialize, this cushion is released and, with this additional margin, the negative impacts of a restriction in the supply of credit are mitigated.
  • The CHL CMF maintains that the use of the RCC as a resilience tool is appropriate.
  • This framework for the RCC is also consistent with the recent discussions presented by the Basel Committee, which highlight the importance of having this tool available.
  • It is key to consider current solid solvency level of banks revealed by stress tests.
  • Effectiveness
  • In accordance with the RCC implementation deadlines, banks must establish the entire buffer within one year and, therefore, include it in the solvency reports of May 2024.

Regulators CHL CB; CHL CMF
Entity Types Bank
Reference PR, 5/24/2023
Functions Accounting; Compliance; Financial; Legal; Risk; Treasury
Countries Chile
Category
State
Products Banking; Equity
Regions Am
Rule Type Final
Rule Date 5/24/2023
Effective Date 5/1/2024
Rule Id 173939
Linked to N/A
Reg. Last Update 5/24/2023
Report Section International

Last substantive update on 05/29/2023