Prepared by John Leimone (MAE) with input from Marco Espinosa (WHD).
Interest on other BCCh instruments, namely, credit facilities and the overnight deposit facility, are also set in nominal terms.
Some experts suggest that once the merger is finalized, it is very likely that the merged bank will sell about 5 percent of its loan portfolio.
The reforms are being studied by the BCCh, the SBIF, the Ministry of Finance, and the Chilean Banking Association.
Chile differs from GAAP accounting practices regarding overdue loans. In particular, only the portion of a loan overdue for more than 90 days is classified as overdue, unless legal proceedings are initiated for recovery. Based on SBIF adjustments, estimated overdue loans using U.S. GAAP methodology would result in a figure of less than 3.9 percent of the total loan portfolio.
Under central bank regulatory requirements, no domestic bank can have a positive or negative foreign exchange rate position of more than 20 percent relative to their capital. Specifically, twenty one banks (fourteen) of the banks in the study had a foreign exchange exposure, in absolute terms, lower than 20 percent (10 percent) relative to their capital.
See “Latin American Roundup: Argentina and the Region,” by C. Krossler, S &P, December 2001 and “The Chilean Banking System” by G. Lopez-Cortes, FitchRatings, May 2002.