Chile: CMF Authorizes postponement of 3 installments on mortgage loans and suspension of auctions by COVID-19
La Commission for the Financial Market (CMF) reported that its Council approved on Monday new measures aimed at giving greater flexibility to the banking system in the context of the global pandemic due to the coronavirus and complement the measures adopted by the Government and the Central Bank.
These provisions aim to facilitate the flow of credit from the financial system to companies, individuals and households that may be affected by the disruptions of Covid-19 and which consist of:
- Facilitate the possibility of deferring up to three installments in the payment of mortgage loans. This special treatment targets those debtors who were up to date in their obligations at the time of decreeing the state of emergency by the authority and who will be transferred at the end of the loan without being considered as renegotiation.
- Facilities for banks to make loan installments to SME debtors flexible up to 6 months, without this being considered a renegotiation, so that banks can increase the term of consumer loans in installments to SMEs and individuals up to six months.
- Possibility of using surplus mortgage collateral to guarantee loans to SMEs. The CMF will establish a regulatory amendment in the short term with a view to allowing the use of surplus mortgage guarantees to guarantee loans to SMEs.
- Extension of terms for the sale of goods received in payment. The entity exceptionally authorized an extension of 18 months in the term that banks have to auction off the goods received in payment in a period of economic contraction such as the one the country is experiencing.
- Treatment of the margin of variation of derivatives. The CMF ordered an amendment to the treatment of the cash amount that banks must provide as collateral for the margin of variation of bilaterally offset derivatives operations. It allows offsetting the value of the derivative with the amount constituted as guarantee in favor of the counterparty. With this, there would be a significant reduction in the capital charge associated with derivative contracts, which stimulates their use, precisely, in periods of greater volatility in the exchange rate.
As explained by the Council of the Commission for the Financial Market, "These are temporary flexibilities that can be adopted as long as they do not weaken the institutions' solvency and liquidity in the medium term".
He added that “notwithstanding the foregoing, it is of utmost importance that banks maintain adequate risk management policies and establish prudent dividend distribution policies, based on the exposure and risks they face in the new situation. It is the responsibility of the corporate governments of each entity to ensure that this occurs. ”
The CMF will shortly announce the expansion of similar regulatory support measures for other actors in the financial system and explained that it is in close coordination with the Ministry of Finance and the Central Bank, and other regulators at the international level, monitoring the effects on the financial market. and in the entities under their supervision.
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