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Chilean Central Bank Sets Rules on Financing for Banking Institutions to Support Funding and Refinancing of Loans and Postpones Deadlines to Facilitate Applications to Public Contests 

by Diego Peralta

Published: March, 2020

Submission: March, 2020

 



26 March 2020


Chilean Central Bank sets rules on special financing for banking institutions to support funding and refinancing of consumer andcorporate loans, along a temporary flexibilization of its regulation onliquidity management in the banking industry


As a response to the financial tensions triggered by the dissemination of Covid-19, the Chilean Central Bank (BCCh) announced on Monday 23 March 2020 a series of measures aimed atgranting liquidity for the economy and supporting the flow of credit and the conveyance of themonetary policy. Among these, there is the establishment of the Credit Facility Conditioned to theIncrease in Placements (FCIC), as special financing facility for banking companies, supplementedby the activation of the Liquidity Credit Facility (LCL) subject to special terms and conditions, bothin domestic currency (Chilean Peso).


On the matter, the Board approved today the rules that shall govern the terms and conditionsapplicable to the FCIC and the activation of the LCL, instructing the immediate disclosure of saidregulation and the legal documentation required to request access to it, at the institutional websitewww.bcentral.cl, which will enable implementing the use of both mechanisms as of next Monday,March 30.


The FCIC es a financing facility open to all banking businesses that have commercial andconsumer placements, subject to the granting on their part of sufficient liens to the benefit of theBCCh. The FCIC boasts objectives and incentives for banking institutions to continue to fund andrefinance private loans and corporate loans, especially for those who do not have access to thecapital market. The FCIC will be available for 6 months and will have an expiry term of up to 4years.


The LCL is a Liquidity Credit Facility activated by the BCCh, which ceiling is the Average CashReserve in domestic currency that each banking institution has. Access to and use of the LCL issubject to the same conditions associated to the increase in placements set forth for the FCIC,with the difference that its security is the Cash Reserve. The LCL will be available for 6 monthsand will have an expiry term of up to 2 years.


Both mechanisms share a common initial facility, available right away, for up to 3% of the aggregate of their corresponding commercial and consumer portfolios (base portfolio), measured in Chilean pesos as at 29 February 2020, equivalent to USD$4.8 billion. There is an additional facility, that in the case of the FCIC will, at the beginning, have a ceiling of up to 15% of the base portfolio -but which may be extended by the BCCh if circumstances so require it-; whereas in the case of the LCL, said additional facility must observe the limit of the Cash Reserve of each of the banking institutions.


On the other hand, and pursuant to that announced, the Board instructed the flexibilization andadjustment of the BCCh’s liquidity regulation to allow for the controlled use, in a context ofprudential protection, of the buffers that the regulation itself fosters, keeping the regulatoryrequirements of report.


The mechanisms specified to advance in that direction, in matters of banking entities’ liquiditymanagement, were consulted with the Board for the Financial Market (CMF), on the grounds ofwhich several alternatives were assessed, in short adopting the following resolution approved bythe Board of the Bank, effective forthwith:


i. Temporary suspension of the fulfilment of the timeframe mismatch requirements set forth in No.8.2 of Chapter III.B.2.1 of the Compendium of Financial Regulation (CNF) of the BCCh, both for 30 daysin the case of once the basic capital, and for 90 days in the case of twice the basic capital.


ii. This exceptional measure shall apply for 90 calendar days as of the adoption of the Agreement,and its renewal shall be decided if the circumstances giving rise to it persist.


In order to make the foregoing decisions regarding an explicit regulatory framework, and for theiruse in every sort of situation in current and future contingencies to be possible, No. 12 ter wasincorporated to Chapter III.B.2.1 in order to manage events during the contingency that might stemfrom national emergency situations or other serious exceptional cases, through temporarymeasures for the flexibilization or adjustment of this regulation.


Lastly, among the measures adopted, the choice was not to amend the applicable regulatory limitto the liquidity coverage ratio (LCR), as per that informed on 23 March 2020.


In that regard, it was deemed that the CMF, through the usual supervisory processes it applies,may assess potential temporary diversions from the LCR on a case-by-case basis, in exercise ofits monitoring criterion; to these ends considering current affairs and the use given to theadditional liquidity facilities announced by the BCCh.


 


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Journalists requiring getting in touch with the Chilean Central Bank may do so through the Communications Department, at the e-mail address [email protected], or via telephone at (56-2) 2670 2438.


 


Link to article: https://covid19.carey.cl/wp-content/uploads/2020/03/chilean-central-bank-sets-rules-on-special-financing-for-banking-institutions-to-support-funding-and-refinancing-of-consumer-and-corporate-loans.pdf


 


 


27 March 2020


Chilean Central Bank postpones deadlines and modifies terms to facilitate applications to public contests to appoint Antitrust Court Judge


Given the sanitary emergency triggered by the onset and dissemination of Covid-19 and the resulting lockdown for 7 boroughs in the Metropolitan Administrative Region -among which there is the borough of Santiago, domicile of the Chilean Central Bank-, the Board of the BCCh adopted on the date hereof Agreement No. 2296-01, resolving as follows:


I. Extending the time frames set to apply to the current public contests of background information (Concursos Públicos), postponing the deadline of the Summoning Period, originally set for 31 March 2020, until 16 April 2020 at 6 p.m., as contemplated in the Terms and Conditions and in the Application Terms approved through Agreement No. 2283-03-200211, adopted during the Board Meeting held on 11 February 2020.


II. Amending the Terms and Conditions applicable to the Contests and the respective Terms for Application so that said applications may be carried out entirely electronically. Withal, applicants shall keep the hardcopy of the information sent, since they may be requested at a later stage of each of the Contests.


III. Likewise, the Terms for Application are emended in the same foregoing terms, in that referred to the Summoning Period and Reception of Background Information set forth in Sections III.1 and III.2.


IV. Additionally, record is hereby set of the fact that the Bank can authorize that applicants invited to aprivate hearing with the Board may attend such meeting using long-distance means of communications, or electronic or IT means, that the Bank may inform in regard to the meeting already mentioned.


 


The remaining procedures and phases of the application process can be found in the Terms of the Contest https://www.bcentral.cl/contenido/-/ detalle/2296-01-200326


__________________________________________________________________


Journalists requiring getting in touch with the Chilean Central Bank may do so through the Communications Department, at the e-mail address [email protected], or via telephone at (56-2) 2670 2438.


 


Link to article:https://covid19.carey.cl/wp-content/uploads/2020/03/chilean-central-bank-postpones-deadlines-and-modifies-terms-to-facilitate-applications-to-public-contests-to-appoint-antitrust-court-judge.pdf


 


 


 


 

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