CMF Launches Public Consultation on Weighted Asset Regulation: Senate Passes Bills Allowing Central Bank to Buy and Sell Treasury Bonds
31 julio 2020

On July 24, the Financial Markets Commission (CMF, for its acronym in Spanish) launched a public consultation on the regulations for standardized methodology to determine the market risk weighted assets of banks. The text will be open for comments until August 31. In other news, the Senate passed two bills related to the Central Bank’s powers to purchase and sell Treasury bonds. Both initiatives were sent to the Chamber of Deputies. 

The regulations currently in public consultation aim to improve the internal management of capital and risk coverage faced by the banking industry, in line with international standards and the recent amendment to the General Banking Act (LGB,for its acronym in Spanish). It is based on the Basel III simplified standard model for market risk management, stipulating four components or classes of risks: interest rate, foreign currency, stock exchange and commodities.

Access a report of the regulations by clicking here.

On the other hand, the Senate passed a constitutional reform bill that empowers the Central Bank to buy and sell debt instruments issued by the Treasury, under exceptional circumstances; on the open secondary market. They also passed a bill modifying the Organic Law under the same name. 

These rules seek to provide financial stability in periods of turbulence, such as the one experienced as a result of COVID 19. It allows the Central Bank to acquire documents issued by the State, its agencies or companies, and finance public expenditure by providing direct or indirect credits in cases of emergency. With this power, tax revenues could be supported by public policies devised to support citizens.