Chile banks issue warning over draft provisions rules

Proposed changes to provisions rules governing Chile's banks could cost them more than watchdog Sbif has forecast, local paper Pulso reported, citing sector sources.

The draft rules, recently put out to public consultation, imply a cost for the industry of US$275mn.

But, based on the methods outlined for calculating provisions as well as new standards governing business loan award criteria that could negatively affect the size of loan books, the changes would actually cost the industry about US$500mn, they said.

In related news, Sbif published updated corporate governance standards. The watchdog, in a statement, said the standards reflect international best practices.

A bill that modifies the country's banking law to bring it in line with Basel III is in congress. Chile currently has 20 banks, a number due to grow by one after Sbif announced Bank of China had received all requisite banking permits to operate in the country.