Basel III And Its Implementation In Chile – Felipe Moro And Gabriel Acuña

BASEL III'S NEW CAPITAL REQUIREMENTS

Chile is one of the few countries that endured the last global financial crisis, and emerged with a solid and stable economy, mainly due to the strength of its banking sector. Conservative Chilean banks and their zealous authorities learned the lessons from the country's financial crisis in 1982; since then, they have carefully avoided systemic risk, over lending and have kept safe levels of liquidity. Additionally, the Chilean banking industry has grown steadily for the last 30 years. Chile did not adopt Basel II, but the GBA already provided for (and still does) a regulatory capital of at least 8% of risk-weighted assets at all times, equivalent to standard capital requirements under Basel III. Regulatory capital under the GBA is almost entirely comprised of equity and undistributed revenue. However, it does not contemplate Tier 2 capital and the new Additional Tier 1 (AT1) feature of Basel III. AT1 is introduced by Basel III as