The Central Bank of Chile (BCCh, for its acronym in Spanish) has issued a series of regulations to mitigate the effects of the spread of the coronavirus. These include special financing for banking companies to support loan financing and refinancing for both households and businesses, and the temporary relaxation of liquidity management regulations in the banking industry.

Agreement 2297E-01-200326 approves the regulations applicable to the Conditional Financing Facility for Increased Placements for Banking Companies (FCIC) with a Pledge Guarantee. The FCIC is a financing facility open to all banking companies with commercial and consumer placements, subject to sufficient collateral being provided in favor of the BCCh. The objective is to provide incentives for banking companies to continue loan financing and refinancing for households and businesses, especially those lacking access to capital markets. Ther facility will be available for 6 months and has a maturity of up to 4 years.

Agreement 2297E-02-200326 expressly authorizes the use of the Liquidity Credit Line (LCL, for its acronym in Spanish) in local currency, setting the requisite terms and conditions. The LCL is a liquidity credit line activated by the BCCh, whose limit corresponds to the average reserve in local currency of each banking company. The access and use of this credit line are subject to the same conditions associated with the increase of the placements established for the FCIC, the difference being that it is guaranteed by the Reserve Requirement. The LCL will be available for 6 months with a maturity period of up to 2 years.

The BCCh decided to issue Circular No. 639 on April 2 in connection with both agreements which grants banking companies the authorization to exceptionally report on the use of these mechanisms (FCIC and LCL) on a biweekly basis during the month of April.

Finally, agreement 2297E-03-200326 modifies Chapter III.B.2.1 of the BCCh’s Financial Standards Compendium (CNF) regarding the management and measurement of the liquidity position of banking companies. This amendment temporarily suspends compliance with the time mismatch requirements set out in paragraph 8.2 of Chapter III.B.2.1 for 30 days for core capital and 90 days for twice the core capital. This exceptional measure shall be extended for 90 calendar days following the adoption of the agreement, and its renewal remains to be decided according to the circumstances.