Financial Crime World

Chilean Banking Regulators Introduce New Rules to Ensure Safety and Stability

The Chilean Central Bank (BCCh) and Financial Market Commission (CMF) have introduced new regulations to enhance the safety and stability of the country’s banking system. The measures aim to strengthen banks’ capital requirements, liquidity positions, and risk management practices.

Capital Requirements

  • The BCCh has increased the minimum required level of effective equity from 4.5% to 6% of risk-weighted assets.
  • An additional conservation buffer of 2.5% of risk-weighted assets above the established minimum has been introduced.
  • A basic capital requirement of up to 2.5% of risk-weighted assets has been introduced to mitigate systemic risks.

Liquidity Requirements

  • The BCCh has set rules for banks’ liquidity positions, requiring them to maintain an adequate level of liquidity in both local and foreign currencies.
  • Banks must perform stress tests quarterly and establish a formal contingency plan to address potential liquidity deficits.

Relationships with Customers and Third Parties

  • Banks are subject to various regulations governing their relationships with customers, including:
    • Money Lending Operations Act
    • Consumer Protection Act
    • Data Protection Act
    • Anti-Money Laundering Act
  • Banks must report suspicious transactions and cash transactions exceeding US$10,000 to the Financial Analysis Unit.

Outsourcing of Services

  • The CMF has set additional regulatory requirements for the outsourcing of:
    • Data processing services
    • Cloud computing services
  • Due diligence obligations are required when contracting with service providers.

Political Risk

  • Banks are prohibited from outsourcing services to companies located in countries without investment grade ratings, except under certain exceptions.
  • This measure aims to mitigate political risk and ensure the stability of the banking system.

These new regulations aim to strengthen the resilience of Chile’s banking system and ensure the safety and stability of financial institutions. The measures are expected to enhance confidence in the banking sector and promote economic growth.