October 3rd/2023.
At the end of August, the Superintendency of Finance (SFC) published for comments a draft circular that temporarily modifies Chapter XXXI SIAR of the Basic Accounting and Financial Circular (CBCF as per its acronym in Spanish). The current macroeconomic situation has been characterized by an economic slowdown and persistent inflation, factors that have had a significant impact on households’ financial burden and borrowers’ ability to pay. In response to this situation, a modification in the treatment of modified loans has been proposed, providing borrowers with an additional opportunity to settle their debts before their credits are considered “restructured.”
In this way, the External Circular Project published by the SFC has established the following guidelines:
- Temporary Extension of Default Period: All credits that are modified from the effective date of the circular until September 1, 2024, will continue to be considered as such, provided they do not have a delay exceeding sixty (60) days. If the latter occurs, they will be considered as “restructured.” Supervised entities may reclassify the credits in a timeframe shorter than the maximum period established in the circular.
- Changes in the Treatment of Restructured Credits: Starting from the effective date of the Circular, consumer credits that have been restructured and become delinquent for a period equal to or exceeding 30 days will be considered as non-performing.
- Debtor Risk Rating: Financial institutions are instructed that the risk rating of debtors within the portfolio subject to the provisions of this new regulation shall adhere to the provisions outlined in section c) of subclause 2.3.2.2.1. of Part II of Chapter XXXI SIAR of the Basic Accounting and Financial Circular.
- Prohibition on Reversing Provisions: The Circular establishes that supervised entities are not allowed to reverse provisions that were previously set aside for modified or restructured credits before the effective date of the Circular.