Financial Markets Commission
September 7th, 2018
Joaquín Cortez
1
Chilean securities and insurance landscape and regulatory roadmap
Chilean Financial Market
Chilean Financial MarketParticipants and Regulatory Framework
Financial infrastructureStock and Commodities Exchanges DCVCCLV Combanc SAG Comder LBTR
Credit Suppliers• Banks• Cooperatives• Credit Card
Issuers• Leasing and
Factoring
Other credit suppliers not supervised by the SBIF
Financial System
Securities and Commodities Intermediaries• Banks• Securities
Brokers• Securities
Agents
Securities Issuers• Chilean or Foreign
entities• Corporations• Mutual and
Investment Funds• Insurance
Companies
Institutional Investors• General Fund
Managers• Portfolio Managers• Insurance Companies• Pension Funds
Managers• AFC
Gatekeepers:• External Audit Providers• Credit risk rating providers
Portfolio Managers not supervised by the CMF
Regulators
Central BankBanks and Financial
Inst. SuperintendenceFinancial Market
CommissionPension Funds
SuperintendenceCEF
Chilean Financial Market
Assets under management
33 38 42 48 55 62 77 90 76 97 113 114 126 139 163 178 189 211 214
12 14 15 18 20 22 23 27 31 32 35 38 44 47
53 60 66 71 74
20 18 29 29 28 30 34
44 47 51
55 62 25 27
64 70 73 77 87 100 115
140 168 175
196 227 255
287 294
331 375
359 381
-
100
200
300
400
500
600
700
800
Financial System Assets(USD Bn)
Pension Funds Insurance Companies Mutual Funds Investment Funds Banks
Source: Financial Markets Commission (CMF), SBIF, Central Bank of Chile
Chilean Financial Market
Assets under management
Source: Financial Markets Commission (CMF), SBIF, Central Bank of Chile
49% 52% 53% 56% 56% 56% 57% 61%
50%
62% 62%58% 60% 62%
68% 69% 69% 72% 71%
17% 19% 20% 21% 20% 19% 18% 18% 20% 20% 19% 19% 21% 21% 22% 23% 24% 24% 24%
6% 8% 10% 10% 11% 10%
12% 13% 12%18% 16% 14% 14% 15% 18% 18% 18% 19% 20%
2% 2% 2% 2% 2% 2% 3% 4% 3% 4% 4% 4% 4% 4% 4% 5% 7% 9% 9%
94% 96% 94% 90% 89% 89% 86%95%
110% 112% 108%114%
120%128%
122%128%
136%
123% 126%
0%
20%
40%
60%
80%
100%
120%
140%
160%
Financial System Assets(% of GDP)
Pension Funds Insurance Companies Mutual Funds Investment Funds Banks
¿What is the Financial Markets Commission?
The Financial Market Commission (CMF) is the public organism in charge of regulating and supervising the entities participating
and the activities developed in the securities and insurance markets in Chile
Mandate
Ensure the sound functioning of the financial system
Financial stability and systemic risk supervision
Capital market development
Strategic Goals
Reduce the information
asymmetry for the decision
making process
Raise the market conduct
standards
Promote the effective risk management by supervised
entities
Develop conditions to
enhance financial inclusion
Strengthen the institutional
management
10
¿What is the Financial Markets Commission?
The board of the CMF is an independent and collegiate body
Supervision
• Supervision of compliance with laws, regulation and administrative rulings.
Regulation
• Issue regulatory norms or rulings
• Regulatory modeling
• Regulatory impact analysis
• Public consultation
Enforcement
• Independent prosecutor office
• The prosecutor has additional enforcement tools
• Informant and leniency program
• After a due process, the board can impose sanctions
Capital Markets Development
• Promote initiatives for markets development
• Support initiatives for product development, instruments and their promotion
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Financial Market Comission (CMF)
Securities
Mar
ket
Infr
astr
uct
ure
Inte
rmed
iari
es
Secu
riti
es Is
suer
s
Fun
ds
& A
sset
M
anag
ers
Rat
ing
agen
cies
&
aud
ito
rs
Insurance
Life
insu
ran
ce
Gen
era
l in
sura
nce
Bro
kera
ge a
nd
A
dju
ster
Supervisory Perimeter
12
Our focus so far…
Transition from the SVS to the
CMF
Simplified sanction process &
informant leniency programs
Formalize IOSCO principles for
financial market infrastructure
Widening of investment limits
for insurance companies
Regional integration and
“funds passport”
Increase asset eligibility for
voluntary pension savings
13
Roadmap
14
Risk Based Supervision
for Insurance Companies
Fintech Law and
Regulation
Capital Markets
Development and
Modernization
Risk-Based Supervision for Insurance Companies
15
Strengthening Insurance Companies’ Risk Management Processes
Greater flexibility for insurance companies to
determine their own business
model
Capital requirements
based on insurer’s risks under total
balance approach (CBR)
Increase competitiveness of
local industry by the convergence to
international standards (IAIS,
OCDE, FSB)
Enhance regulator’s supervisory attributions
Additional tools to adopt preventive supervision and early corrective
measures
Supervision based on an enhanced
system of solvency assessments
(capital adequacy & net risk)
Implementation and regulation is
handed to the Supervisory
Authority (CMF)
More flexible investment regime,
removing most limits on
investment assets due to CBR
FintechWhat are we thinking?
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How to Foster Growth and Innovation in the Financial Sector
Technological Neutrality
Equivalent regulation to traditional services that are technology intensive
Increase competition by imposing similar standards to similar services and products
Modernization of current regulatory requirements
Platforms
Securities Exchanges
Alternative trading systems
Crowdfunding platforms
Proportionality
Requirements proportional to risks involved
Regulatory sandbox for newly developed business models
Regulations by function not by entity
Custody
Crypto-currencies
Tokens
Securities
Others
Robo-advisors
Scoring
Capital Markets Development and Modernization
17
Modernizing Regulation and Supervision
Corporate Governance
Improve the “Best Practices Code” (NCG 385) to include international standards and ESG considerations
Enhance information on companies’ sustainability practices (NCG 386)
Market Depth and Liquidity
Modernization of Market Maker requirements (NCG 327) for a security to be determined as “liquid”
Reviewing standards of minimum offer, contract duration, amount traded and number of days with trades
Strengthening Supervision
Enhance risk-based supervision methodologies for insurance, intermediaries and market infrastructure
Reinforce supervision teams with an emphasis on operational risk
Regional Integration
Making the “Funds Passport Initiative” work to facilitate the commercialization of funds in Latam
Joint work with Colombia, Mexico and Peru
Conversations with Argentina regarding securities
Financial Markets Commission
September 7th, 2018
Joaquín Cortez
18
Chilean securities and insurance landscape and regulatory roadmap