As Chile's CMF adopts twin peaks model, officials outline benefits, pending tasks

Bnamericas Published: Friday, May 07, 2021

Adoption of a twin peaks model by Chilean financial market commission CMF is allowing the watchdog to better align its structure with its legal mandate as officials say the process requires time and that challenges remain.

CMF started shifting over to an internal twin peaks model last quarter after consulting regulators in other jurisdictions and following best practice recommendations from a special commission and IMF officials.

Key objectives of the move – which largely involves creating prudential, or solvency, and market conduct pillars – include achieving synergies and boosting oversight of financial conglomerates.

This followed the overhaul and renaming, to CMF, of insurance and securities commission SVS and the subsequent incorporation of banking watchdog Sbif several years ago.

On the twin peaks model adoption, CMF chairman Joaquín Cortez said during a regulatory event hosted by the Chilean office of professional services firm EY: “We’re starting the process, of what we have learned from international regulators.

“This takes time, it’s not something that can happen from one day to the next.”

CMF deputy chairman Kevin Cowan echoed this: “I would say that so far, without doubt, the change has been positive and, as Joaquín said, it’s a process that’s underway and there’s still some way to go.”

Cowan said a key benefit is obtaining a comprehensive view of the country’s conglomerates and of principal economic risks and how these could impact companies.

One institutional-level challenge that remains surrounds the question of which mandate – solvency or conduct – should be prioritized when there is an associated conflict of interest and who should take that decision.

“It’s an issue, that in some respects, today, is pending,” said Cortez.

Another challenge, Cortez said, is achieving greater budgetary autonomy or having a long-term budgetary plan, citing the importance of attracting and retaining talented professionals.

Academic and former SVS chief Fernando Coloma said close coordination was needed between the solvency and conduct pillars.

“There needs to be permanent dialogue … the issue is that, suddenly, market conduct problems can reveal solvency problems. For example, if a bank or insurer has a lot of complaints concerning conduct, it may be revealing a problem to do with solvency.

Coloma told the event: “It’s necessary to give this structure [twin peaks] time to bear fruit.” Echoing Cortez, he added that having skilled officials was vital.

Mario Gazitúa, president of the country’s association of insurers, AACh, stressed the importance of insurance market development to citizens and the wider economy, and repeated a call for the introduction of a single supervisory framework for industry players.

“The development of the insurance market, together with that of other sectors, is key to the country’s development and if we don’t achieve this, it is individuals who lose out,” Gazituá told the conference.

Comments made by Gazitúa concerning the need for close coordination between, and delineation of, regulatory entities, were echoed by José Manuel Mena, president of local banking association Abif.

“We have the [anti-money laundering unit] UAF and [consumer protection agency] Sernac, so coordination is necessary in the market conduct pillar so that the spheres of operation and attributions of these organizations do not collide; they must be established in a better way," Mena said.  

A risk-based supervision bill for the insurance sector was submitted to congress in 2011 but stalled in the senate after being approved by the lower house. It was revisited in 2018 and 2019, but again failed to advance and then the COVID-19 pandemic took precedent.  

The industry has previously said that it was subject to elements of both traditional and risk-based supervision regimes, citing associated demands on company resources this entails.


In the Americas, the most common regulatory model is sectoral, where regulation and supervision is carried out by separate agencies with responsibilities for banking, securities and insurance.

Chile previously had a twin-agency structure, comprising SVS and Sbif.

The country now has what is known as an internal twin peaks model, as regulatory and supervision activities, via the two pillars, are carried out within a single agency: CMF.

Under the twin peaks model, CMF has four core departments. Two of these correspond to the prudential pillar: the general department of prudential supervision and the general department of prudential regulation. The other two correspond to the market conduct pillar: the general department of market conduct supervision and the general department of market conduct regulation.

CMF came into being in early 2018, assuming the duties and responsibilities of SVS. A key reason for the change was to provide regulatory authorities with more independence and associated tools.

In 2019, CMF also began overseeing the country’s banks and non-bank financial institutions after absorbing Sbif. 

CMF is led by a five-member collegiate body, one appointed by the country's president and four put forward by the president and which must be ratified by a congressional committee. Members have fixed terms. 

ALSO READ: Chile’s financial services watchdog to adopt twin peaks-based framework

ALSO READ: Chile financial services watchdog outlines regulatory gaps, sector challenges

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