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CMF publishes in consultation the new standardized methodology for calculating provisions for consumer loans

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The Commission for the Financial Market (CMF) reported the beginning of the public consultation of the standardized methodology for the computation of provisions for placements and contingent consumer loans granted by banking institutions established in the country.

Provisions are a tool that helps to ensure that banks have sufficient resources to support the possible losses associated with the loans they grant, so that they carry out adequate prudential credit risk management.

Specifically, provisions are the accounting record of the expected loss (EL) of the credit operations carried out by a bank. This value is calculated as the product of the 12-month probability of default (PD) and the loss given default (LGD).

Methodological advances

The Commission has developed various methodologies for determining the PD and LGD parameters.

The history of these methodologies begins in 2011 with the implementation of the PD and LGD parameters to provision the exposures of the commercial portfolio evaluated individually. This change repealed the old Chapter 7-10 of the Updated Compilation of Standards (RAN) and was introduced in Chapter B-1 of the Compendium of Accounting Standards for Banks (CNC).

Then, in 2014, the standard method for the home mortgage loan portfolio was incorporated into Chapter B-1 of the CNC. Subsequently, in 2018, the standard methodology for provisions for commercial loans under group analysis was created.

New regulations

In this context, the regulations put up for consultation today aim to introduce a standard provisioning method for consumer loans in Chapter B-1 of the CNC.

As for the other portfolios, the regulations establish matrices for determining the PD and LGD parameters that must be used to calculate the level of provisions.

This methodology follows the best international practices and is consistent with the rest of the regulatory provisions associated with the determination of capital requirements for credit risk.

In this way, it contemplates risk factors that allow timely recognition of credit risk, as well as the generation of incentives to manage it prudently, strengthening the stability of the banking system.


Considering the size of the consumer portfolio as of December 2021 and assuming that its behavior does not show significant changes, the regulation would translate into an increase of close to 1,000 million dollars in provisions in relation to the new required standards, which could, in some cases, be mitigated with other items of voluntary provisions that banks currently have.

This impact would not have relevant consequences on banks’ capital adequacy levels, which would have sufficient margins to absorb it.

To access the details of the regulations, you can enter the Regulations section in Consultation of the Institutional website.

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