Circular No. 2378 — Adjustments to Chapter 21-7 of the Updated Compilation of Bank Regulations on the Measurement of Risk-Weighted Assets for Market Risk and the Risk System of the Bank Information Systems Manual

In December 2020, the publication of regulations for the implementation of Basel III standards in local banking regulation was completed, in accordance with the modifications made to the General Banking Law by Law No. 21,130. This process involved the introduction of Chapter 21-7 into the RAN.

During the implementation of the aforementioned regulations, areas for improvement have been identified that allow aligning capital requirements for market risk with the risk management performed by banks, as well as optimizing the sensitivity of the current model. Regarding the latter element, the modifications addressed in this Circular enable banks to use the duration method for estimating capital requirements for general interest rate risk.

Based on the above context, the following adjustments and additions are made to the current text of Chapter 21-7 of the RAN. Additionally, adjustments are considered to file R07 of the Risk System of the Bank Information Systems Manual (MSI), to allow reporting the computation of risk-weighted assets for market risk under the duration method.

The detail of the regulatory adjustments is described below (those additions to the current text are in yellow):

I. Chapter 21-7 of the RAN

To define the computation of general interest rate risk, whether under the maturity method or the duration method, the Commission introduces modifications to the guidelines established in Chapter 21-7 of the RAN, the detail of which is exposed below:

1. In item 2.1 “Criteria for assignment to the trading book”, the first paragraph is adjusted as follows:
   “The trading book comprises all positions, both active and passive, computed at market value. Valuation methodologies must be clearly stipulated within fair value policies as indicated in Chapter 7-12 of the RAN.”

2. In item 3.1.2 “General interest rate risk”, the first paragraph is modified, establishing the following new first, second, third, and fourth paragraphs:
   “For the calculation of the charge for general interest rate risk, banks must use the maturity method. Those with sufficient technical and operational capacity may use the duration method, from the moment they communicate this to this Commission, attaching the background information detailed in Annex 1. The Commission may require a return to the maturity method if material findings are found in ex post reviews, leading to the conclusion that it is not properly implemented, in accordance with the requirements of this Chapter. If the entity voluntarily decides to return to using the maturity method, this must be explained and communicated to this Commission, in order to obtain its prior ruling. Both methods must consider both active and passive positions; the market value of each instrument must be assigned to thirteen time bands, considering both active and passive positions, distinguishing by currency type and rate type (fixed or floating). The currencies considered are non-adjustable national (CLP), nationally adjustable by UF, IVP, UTM or IPC (UR), or foreign (MX).”

3. The new fifth paragraph of item 3.1.2 “General interest rate risk” is adjusted as follows:
   “In the maturity method, fixed-rate instruments are assigned to bands based on their residual maturity, as appropriate, while floating-rate instruments are assigned based on the next rate recalculation period.”

4. The new sixth paragraph of item 3.1.2 “General interest rate risk” is eliminated:
   “Derivative instruments, excluding options, must be decomposed according to their underlyings and assigned to the corresponding time bands. Additionally, the delta-weighted positions of interest rate options must be included, when applicable, as stipulated in item 3.5.”

5. The following new paragraphs are incorporated into item 3.1.2 “General interest rate risk”, becoming the sixth and subsequent paragraphs:

“Additionally, the delta-weighted positions of interest rate options must be included, when applicable, as stipulated in item 3.5.
In the duration method, instruments must be assigned to time bands based on the result of the duration calculation.
Entities using the maturity method must assign the market value of each instrument to thirteen time bands according to the following table.

Zone	Time Band	Rate Change (bp) - ∆ymt	PRM CLP	PRM UR	PRM MX
Zone 1	< 1 month	115	0.00%	0.38%	0.00%
	1 – 3 months	110	0.21%	0.80%	0.21%
	3 – 6 months	105	0.51%	1.14%	1.17%
	6 – 12 months	100	0.86%	1.42%	2.09%
Zone 2	1 – 2 years	90	1.25%	1.67%	2.95%
	2 – 3 years	85	1.69%	1.89%	3.77%
	3 – 4 years	80	2.18%	2.12%	4.54%
	4 – 5 years	75	2.71%	2.38%	5.26%
Zone 3	5 – 7 years	70	3.29%	2.67%	5.92%
	7 – 10 years	65	3.92%	3.04%	6.54%
	10 – 15 years	60	4.59%	3.49%	7.11%
	15 – 20 years	60	5.31%	4.06%	7.63%
	> 20 years	60	6.07%	4.75%	8.10%

On the other hand, entities using the duration method must multiply the market value of each position by the calculation of the price sensitivity of each position separately through modified duration – expressed in years – and then multiply by the change in interest rates (∆ymt) shown in the table above. The ∆ymt value to be used must be determined based on the location of the duration in each time band of the table above, as well as its currency.

In any case, the entity using the duration method must continue to measure interest rate risk using the maturity method, submitting the associated information to this Commission in accordance with the instructions issued in the information system files for such purposes.

Derivative instruments, excluding options, must be decomposed according to their underlyings and assigned to the corresponding time bands, according to the method used.

The charge for general interest rate risk corresponds to the sum of three components: the weighted net position, the result of applying the vertical adjustment, and the result of applying the horizontal adjustments, regardless of the method used, whether maturity or duration.

The weighted net position, for the maturity method, is calculated as:

∑|∑(PRM_mt ∙ A_mt − PRM_mt ∙ P_mt)|
13 t=1
|
M m

Where A_mt corresponds to the value of active positions in the Trading Book; P_mt corresponds to the value of passive positions in the Trading Book; t corresponds to the time bands; m corresponds to the currencies; and PRM_mt are the market risk weighters by time band and currency.

The weighted net position, for the duration method, is calculated using the following formula:

∑|∑∆ymt ∙ ∑(DMi ∙ POSi)| i
13 t=1
|
M m

Where DMi corresponds to the modified duration of position i in the Trading Book; POSi corresponds to the value of each position i, which is positive if it is an asset and negative otherwise; and ∆ymt corresponds to the rate change associated with the respective time band and currency.

The result of applying the vertical adjustment (β), for the maturity method, is calculated as:

∑∑β ∙ min(PR M_mt ∙ A_mt ; PRM_mt ∙ P_mt)
13 t=1
M m

The result of applying the vertical adjustment (β), for the duration method, is calculated as:

∑∑β ∙ ∆ymt ∙ min ( ∑ (DMi ∙ POSi) if POSi>0 ; | ∑ (DMi ∙ POSi) if POSi<0 | ) 13 t=1 M m

The application of horizontal adjustment factors (λi and λij, as appropriate) must consider, first, the net positions compensated in each of the three zones defined in the following table and then between the net positions compensated between different zones. Thus, the result of applying the horizontal adjustment factors will be the sum, by currency, of the following products:

• The weighted net positions compensated in Zone 1 ∙ λ1
• The weighted net positions compensated in Zone 2 ∙ λ2
• The weighted net positions compensated in Zone 3 ∙ λ3
• The weighted net positions compensated between Zones 1 and 2 ∙ λ12
• The weighted net positions compensated between Zones 2 and 3 ∙ λ23
• The weighted net positions compensated between Zones 1 and 3 ∙ λ13

Both the PRM by currency and time band, as well as the vertical and horizontal adjustment factors, are determined according to the following tables:

Zone	Time Band	Vertical Adjustment Factor	Horizontal Adjustment Factors
			Within zone	Between adjacent zones	Between zones 1 and 3
Zone 1	< 1 month	β=10% (maturity) and β=5% (duration)	λ1 = 40%	λ12 = 40%	λ13 = 100%
	1 – 3 months		λ2 = 30%	λ23 = 40%
	3 – 6 months
	6 – 12 months
Zone 2	1 – 2 years
	2 – 3 years
	3 – 4 years
	4 – 5 years
Zone 3	5 – 7 years	λ3 = 30%
	7 – 10 years
	10 – 15 years
	15 – 20 years
	> 20 years

The APRM for general interest rate risk is the simple sum of the charges of all positions subject to general market risk, multiplied by 12.5.”

6. The first paragraph of item 3.5 “Treatment of options” is adjusted, as well as the reference to Annex 1 by Annex 2 in the second paragraph of this item.
   “For the treatment of options, the bank that only registers positions in acquired options may use any of the three methods indicated in this item. The bank that, in addition, registers sold options, and these are plain vanilla type, may not use the simplified method. The bank that registers sold options that are not plain vanilla type must use only the scenario method.”

7. Annex 1 “Requirements for the use of the duration method in the measurement of general interest rate risk” is introduced.

“ANNEX 1
REQUIREMENTS FOR THE USE OF THE DURATION METHOD IN THE MEASUREMENT OF GENERAL INTEREST RATE RISK

In accordance with what is stated in item 3.1.2 of this Chapter, for the computation of general interest rate risk, banks may opt to use the duration method. For these purposes, entities must inform this Body, including at least the following elements:

a. Evidence of the approval of the use of the duration method for the computation of Risk-Weighted Assets for Market Risk, in the instance of the Assets and Liabilities Committee and/or Risk Committee, along with its subsequent review and approval by the Board of Directors.

b. Document containing the criteria and assumptions considered in the calculation of modified duration for each type of instrument, the treatment of instruments with options, the treatment of amortizable instruments, among other typologies that the bank might identify. Additionally, the source of information used must be indicated, among other elements that the bank deems relevant.

c. Evidence that through the calculation of modified durations, it obtains results consistent with its own valuations of financial instruments, for a given month-end, employing for this a representative sample of the current portfolio, covering the types of instruments and relevant risk factors in its operations.

d. Result of the implementation of the duration method for, at least, three consecutive periods prior to the Communication sent to this Body (monthly closings at the level of individual consolidation). This calculation can be performed with any period of 3 consecutive months comprised within the last 12 months.

e. Report performed by an area independent of the function that generated the computation of APRM, referred to the environment of the normative method. The report must cover an opinion on the following elements:
i. Compliance of the method with the normative criteria of this Chapter.
ii. Reasonableness of the criteria and procedures used for the application of the duration method.
iii. Quality of the documentation.
iv. Integrity and consistency of the source of information used.
v. Replication and validation of the APRM computation using the duration method.

Likewise, in the supervision processes, the entity’s situation in the matter “Financial Risk and Treasury Operations” provided for in Chapter 1-13 of the RAN will be considered, as well as the background and observations that have been collected in the review processes associated with the Evaluation of Effective Capital Sufficiency in accordance with Chapter 21-13 of the RAN.”

8. The title of the Annex is adjusted from “Annex” to “Annex 2”.

On the other hand, minor drafting adjustments are made for better interpretation of the regulation:

1. The first paragraph of item 2 on “Evaluation of the options model” in Annex No. 2 and its letter b. are adjusted as follows:
   “The evaluation of the models to determine the market risk charge for options, whether the delta plus method or the scenario method, will comprise the analysis of the bank’s situation in the matter of “Financial Risk and Treasury Operations” and the performance of analyses and tests that allow obtaining an opinion on the methodological consistency of the model, as well as on the robustness of the processes and procedures established by the entity for the administration of the risks inherent to this type of instrument.

With the purpose of facilitating the evaluation, the entity must have available to this Commission the following additional elements to the detailed report described in the previous item:
a. Policies referred to the options activity. b. Documents of analysis and approval of the product.”

2. In item 1 “General Considerations” of the Chapter, the first and second paragraphs are adjusted as follows:
   “In accordance with what is provided in the first paragraph of Article 67 of the General Banking Law (hereinafter LGB), this Chapter establishes the standardized methodology that banking companies must consider to determine the computation of risk-weighted assets for market risk (hereinafter APRM). This calculation methodology, described in item 3, applies to all exposures defined in item 2 of this Chapter, both at consolidated and local consolidated level. In this latter level, subsidiaries abroad are not considered.

Adherence to the guidelines established in this regulation will be part of the management evaluation that this Commission performs on banks in the area of market risks, which is addressed in letter b) of item 3.2 of Title II of Chapter 1-13 of the Updated Compilation of Regulations (hereinafter RAN).”

3. In item 2 “Scope of application and definitions”, the first paragraph is adjusted as follows:
   “The computation of APRM applies to financial instruments classified in the Trading Book. It has a general market component, associated with movements in reference interest rates, foreign currencies, commodities, and stock market quotes; and a specific component, associated with idiosyncratic aspects of the issuer, such as credit spread and default.

Additionally, foreign currency and commodity risk are considered for Trading Book positions. The interest rate risk of the Banking Book must be measured in accordance with what is indicated in Chapter 21-13 of the RAN.”

4. In item 2.1 “Criteria for assignment to the trading book”, the title, as well as the first, second, and third paragraphs are modified as follows:
   “2.1 Criteria for assignment to the Trading Book The Trading Book comprises all positions, both active and passive, computed at market value. Valuation methodologies must be clearly stipulated within market risk management policies as indicated in Chapter 1-13 of the RAN.

Positions in the Trading Book must be maintained without restrictions for sale or fully hedged, and whose risks must be actively managed. In addition, the aforementioned positions must meet one of the following purposes: short-term sale, obtaining benefits from price movements in the short term, obtaining benefits from arbitrage, or instruments that hedge the aforementioned positions.

The following instruments must be classified in the Trading Book, unless the bank justifies otherwise in accordance with the internal policies it has for these purposes, based on the criteria established in the first paragraph of this item:

i) Instruments qualified accountingly as trading. ii) Instruments resulting from market-making activities.”

5. Likewise, in the same item 2.1 “Criteria for assignment to the Trading Book”, the fourth paragraph is adjusted as follows:
   “For instruments classified in the Trading Book, which, in addition, have committed to a repurchase agreement or simultaneous financing operation, the bank must continue to compute the market risk associated with the traded instrument. Complementarily, sale agreements or simultaneous financings must not consider the market risk of the received title, unless it is sold with the objective of repurchasing it before the maturity of the financing operation.”

6. In item 2.2 “Criteria for assignment to the banking book”, the title and the first and second paragraphs are adjusted as follows:
   “2.2 Criteria for assignment to the Banking Book Any instrument that does not satisfy any of the purposes listed to qualify in the Trading Book must be assigned to the Banking Book. The following instruments must be classified in the Banking Book, unless the bank justifies otherwise in accordance with its internal policies it has for these purposes, based on the criteria established in the first second paragraph of item 2.1:

i) Unquoted shares. ii) Retail exposures, in accordance with the definition of Chapter 21-6 of the RAN. iii) Investments in funds not classified in the Trading Book. iv) Derivatives and funds that have any of the aforementioned instruments as underlying. v) Embedded interest rate derivatives in assets or liabilities of the Banking Book. vi) Instruments that hedge the aforementioned positions.

Positions in the Banking Book in foreign currency or commodities must be included in the determination of APRM. Therefore, for the purposes of this estimation, they are treated as if they were maintained in the Trading Book.”

7. In item 2.3 “Assignment policies” and 2.4 “Internal risk transfers”, the terms “books”, “trading”, “banking”, “banking book”, “trading book”, and “desks” are replaced by “Books”, “Trading”, “Banking”, “Banking Book”, “Trading Book”, and “Desks”, respectively.

8. In item 3.2 “Foreign currency risk”, the fifth paragraph and the associated table are replaced, remaining as follows:

“Where PNAi and PNPi correspond to the net active and passive position, respectively, for each currency i; PNORO is the net position (active or passive) in gold; and PRMi corresponds to the market risk weighter, associated with currency i, which is determined according to the following table:

Basket	Currencies	PRM
1	USD, EUR, AED, AUD, CAD, CHF, CNY, CNH, CZK, DKK, GBP, HKD, ILS, JPY, KRW, NOK, NZD, SAR, SGD, SKK, SEK, TWD and XAU (GOLD)	8.00%
2	Rest of currencies	12.00%
”

9. The second and fourth paragraphs of item 3.3 “Commodity risk” are adjusted as follows:
   “Active and passive positions in the same commodity, or when they are substitutes, are compensated. Two commodities are considered substitutes if they present a minimum correlation of 0.9 between their price series, for at least one year. For the calculation of these correlations, there must be: i) at least 24 observations of real prices, spaced by no more than 90 days, where only one observation per day is allowed, or ii) 100 observations of real prices, where only one observation per day is allowed. Hereinafter, two substitute commodities are considered for the purposes of this Chapter as the same commodity. In case of not meeting the correlation condition, the commodities cannot be considered as substitutes.

Where Ai corresponds to the value of active positions in commodity i; Pi corresponds to the value of passive positions in commodity i; and N corresponds to the number of commodities in which the bank maintains positions.”

10. The second paragraph of item 3.4.2 “General stock market quote risk” is modified as follows:

“Where Ai corresponds to the value of active positions in stock market i (excludes indices and arbitrage strategies); Pi corresponds to the value of passive positions in stock market i (excludes indices and arbitrage strategies); AIi corresponds to the value of active positions in indices and arbitrage strategies in stock market i; PIi corresponds to the value of passive positions in indices and arbitrage strategies in stock market i; and N corresponds to the number of stock markets in which the bank maintains positions.”

11. The first comma of the last paragraph of item 3.5.2 “Delta plus method” is eliminated.

12. The second paragraph of item 3.5.3 “Scenario method” is modified as follows:

10

“For those banks that have a significant portfolio in interest rate options and with the consent at the discretion of this Commission, a reduction to a minimum of 6 time bands for the construction of scenarios will be allowed. This implies that the bank can combine the time bands determined in the general interest rate risk model to generate new segments. Each new generated time band may consist of up to a maximum of 3 original bands. Regarding the assumed change in the rate, the maximum value of the time bands that constitute it must be considered.”

13. In paragraph 3.6.1 “Investment funds and mutual funds”, the new first and second paragraphs will be as follows:

“In the event that the funds classified in the Trading Book meet at least one of the following conditions: a) it is possible to identify all underlying assets and the fund’s information and its constituents are audited by an external company, at least annually, or (b) it is possible to obtain daily quotes of the fund and the bank manages the information of its regulations; the bank may use the constituent approach (LTA, by its acronym in English). This approach consists of decomposing the exposure into its underlying assets, as if it had been invested directly in them. The individualized underlying assets are assigned to the respective risk classes according to the standard model presented in this Chapter.

In the event that the conditions of the previous paragraph are not met, the bank may also use the internal regulations method (MBA, by its acronym in English), subject to the following conditions:”

14. In paragraph 3.6.2 “Securitizations”, the following is adjusted:

“The capital charge and specific risk-weighted assets for securitizations held in the Trading Book must be calculated in accordance with what is stipulated in paragraph 3.13 of Chapter 21-6 of the RAN.”

15. The transitional provisions established in paragraph 4 are eliminated.

II. Risk System of the Bank MSI

In accordance with what is established in the regulatory proposal, particularly regarding the incorporation of the duration method in Section I of this Circular, the following modifications are made to file R07 of the Risk System of the MSI, in order to guarantee consistency in definitions and information requests. The adjustments are as follows:

1. New record 10 titled “General interest rate risk, duration method” is incorporated into the section “Following records”, and records 2 and 8 are modified as follows:

Code Record Type
01 Risk-weighted market assets by simplified standard model 02 General and specific interest rate risk, maturity method 03 General and specific stock quote risk

11

04 Commodity risk
05 Foreign currency risk
06 Option risk
07 Option risk detail through scenario method
08 Positions excluded from general and specific interest rate risk framework 09 Securitization detail 10 General interest rate risk, duration method

2. Record 01 of file R07 titled “Risk-weighted market assets by simplified standard model” is adjusted as follows:

• The list of fields in the record is adjusted as follows:

1. Record Type 9(02)
2. Date F(08)
3. Consolidation Level 9(01)
4. APRM 9(14)
5. Specific interest rate risk 9(14)
6. General interest rate risk 9(14)
7. Foreign currency risk 9(14)
8. Commodity risk 9(14)
9. Specific stock quote risk 9(14)
10. General stock quote risk 9(14)
11. Interest rate option risk 9(14)
12. Currency option risk 9(14)
13. Stock quote option risk 9(14)
14. Commodity option risk 9(14)
15. Charge for transfer of instruments between books 9(14)
16. Securitizations 9(14)
17. Method used for general interest rate risk 9(02)
    17 18. Filler X(01)
    Record length: 1946 bytes

• The description of field 6 “General interest rate risk” is modified as follows:

6. GENERAL INTEREST RATE RISK
   Corresponds to the amount of charges for exposures qualified in the trading book whose value is affected by the variation of market interest rates, considering the general interest rate risk as indicated in paragraph 3.1.2 of Chapter 21-7 of the RAN. This calculation must consider the weighted net position, the result of the vertical adjustment, and the horizontal adjustments obtained by the maturity or duration method, as applicable. Additionally, the weighted delta positions of interest rate options must be considered, where applicable. On the other hand, the amount of excluded positions is exempt from this field.

• Field 17 “Method used for general interest rate risk” is incorporated:

17. METHOD USED FOR GENERAL INTEREST RATE RISK

12

Corresponds to the code that identifies the method used to calculate the interest rate risk reported in field 6 in accordance with what is indicated in paragraph 3.1.2 of Chapter 21-7 of the RAN. The codes correspond to:
01 Maturity method
02 Duration method
Banks that report code 02 must be those that have communicated to the Commission the use of the duration method and provided the information established in Annex 1 of Chapter 21-7 of the RAN.

3. Record 02 of file R07 titled “General and specific interest rate risk” is adjusted as follows:

• The record name is modified to “Specific and general interest rate risk, maturity method”

• The record instruction is adjusted as follows:
  “In this record, all exposures of the bank subject to interest rate risk must be reported, both for its specific and general risk, the latter calculated under the maturity method. Additionally, in the case of options whose underlying is a debt instrument or interest rates, one entry must be calculated at the moment the underlying contract takes effect and a second entry at the moment the underlying contract matures. In the case of securitized instruments, the specific interest rate risk must be reported in this record 9, for which field 6 “Specific interest rate risk” must be completed with the value 99. The same treatment must be carried out for positions in derivatives whose underlying has no issuer, as they are exempt from specific risk charges.”

• The description of field 11 “General risk position amount” is modified as follows:

11. GENERAL RISK POSITION AMOUNT
    Corresponds to the amount of the active or passive position of the exposures (field 5) subject to general risk calculated through the maturity method, in accordance with what is stipulated in Chapter 21-7 of the RAN.
    The amount of excluded positions reported in field 12 must be deducted from the “general risk position amount” of this record.

• The title of field 12 “Perfectly compensated positions amount” is modified as follows:

12. PERFECTLY EXCLUDED POSITIONS AMOUNT
    Corresponds to the amount of exposure in derivatives that would qualify to be excluded from general interest rate risk and are perfectly compensated, corresponding to the active or passive position, in accordance with what is stipulated in Chapter 21-7 of the RAN. If there are no perfectly compensated excluded positions, zero must be reported.

13. Record 08 of file R07 titled “Positions excluded from the general interest rate risk framework” is adjusted as follows:

• The record name is modified to “Positions excluded from the general and specific interest rate risk framework”.

13

• The record instruction is adjusted as follows:
  “In this record, all positions excluded from the interest rate risk framework, due to being perfectly compensated, whether for active or passive positions, must be reported. Such positions must be consistent with those reported, in aggregate, in the field “Amount of perfectly compensated excluded positions” of records 2 and 10.”

5. The following new record 10 is incorporated into file R07 titled “General interest rate risk, duration method”, which is detailed below:

Record to report general interest rate risk: duration method In this record, all exposures of the bank subject to general interest rate risk must be reported, in accordance with what is reported in record 2 of this file. Additionally, in the case of options whose underlying is a debt instrument or interest rates, one entry must be calculated at the moment the underlying contract takes effect and a second entry at the moment the underlying contract matures.

1. Record Type 9(02)

2. Date F(08)

3. Consolidation Level 9(01)

4. Funds 9(02)

5. Exposures 9(02)

6. Interest Rate Type 9(02)

7. Currency 9(03)

8. Time Band 9(02)

9. General Risk Position Amount 9(16)

10. Excluded Positions Amount 9(16)

11. Market Value Amount of Position 9(16)

12. Weighted Average Duration 9(02)V9(03)

13. Weighted Average Modified Duration 9(02)V9(03)

14. Filler X9(116)
    Record length: 196 bytes

15. RECORD TYPE
    Corresponds to the code that identifies the record type. It must be “10”.

16. DATE
    Corresponds to the date to which the information refers.

17. CONSOLIDATION LEVEL
    Corresponds to the code associated with the consolidation level, which must be indicated according to Table 80 of this Manual.

18. FUNDS
    Corresponds to the code associated with the method used to report exposures held in investment funds and mutual funds in accordance with what is stipulated in paragraph 3.6.1 of Chapter 21-7 of the RAN. The codes are:

14

01 Constituent approach
02 Internal regulations approach
09 Direct investment
In the event that the report does not correspond to investments in funds but to other types of instruments in the trading book, code 09 must be reported.
5. EXPOSURES
Corresponds to the code associated with the type of exposure subject to interest rate risks. Exposures must be indicated according to the codes in Table 114 of this Manual.
Non-derivative financial instruments correspond only to those positions in instruments registered in the asset at their market value that do not present restrictions of any nature that could prevent them from being traded and that: (i) are held in portfolio to trade them in the short term with the purpose of obtaining gains from arbitrage or expected fluctuations in prices or market rates; or that (ii) are part of a portfolio of instruments that are traded actively and frequently by the institution. Derivatives must be decomposed into their respective underlyings and these calculated in each risk class and corresponding time band.
6. INTEREST RATE TYPE
Corresponds to the code that assigns the type of interest rate. The codes correspond to:
01 Operations with fixed rates and balances not subject to interest 02 Operations with floating rate
7. CURRENCY
Corresponds to the code that identifies the currency in which the exposures or type of adjustability will materialize. The currency must be indicated according to the codes in Table 1 of this Manual.
For operations payable in pesos adjustable in foreign currency (including those expressed in foreign currency and payable in pesos), the code corresponding to the foreign currency in question must be used and not the code that identifies the type of adjustability.
8. TIME BAND
Corresponds to the code associated with the time bands of instruments according to their duration. The time band must be indicated according to the codes in Table 116 of this Manual.
Derivative instruments, excluding options, must be decomposed according to their legs and assigned to the corresponding time bands.
9. GENERAL RISK POSITION AMOUNT
Corresponds to the amount resulting from the product of the market value, the price sensitivity expressed through modified duration, and the change in interest rates of the active or passive positions according to the currency (field 7) and time band (field 8) calculated through the duration method, in accordance with what is stipulated in Chapter 21-7 of the RAN. The amount of excluded positions reported in field 10 must be deducted.
10. EXCLUDED POSITIONS AMOUNT
Corresponds to the total amount of the market value of the active or passive position that qualifies to be excluded from general interest rate risk, in accordance with what is stipulated in Chapter 21-7 of the RAN. If there are no excluded positions, zero must be reported.

15

11. MARKET VALUE AMOUNT OF POSITION
    Corresponds to the total amount of the market value of the active or passive position that is used to estimate the calculation of general interest rate risk through the duration method reported in field 9 of this record, in accordance with what is stipulated in Chapter 21-7 of the RAN, excluding the amounts of excluded positions reported in field 10.
12. WEIGHTED AVERAGE DURATION
    Corresponds to the weighted average of the duration, expressed in years. For these purposes, the duration must be weighted by the market value of the position of each instrument, cash flow, or leg, as applicable.
    The calculation must be carried out in accordance with the following expression:
    Weighted average of duration = (Σn |Market_Valueₙ| × Durationₙ)/ Σn | Market_Valueₙ| Where:

• n = corresponds to each operation and/or leg reported in the combination of fields 1 to 8.
• Market_Valueₙ = Market value of the individual position of component n.
• Durationₙ = Duration of component n.

13. WEIGHTED AVERAGE MODIFIED DURATION
    Corresponds to the weighted average of the modified duration. For these purposes, the modified duration must be weighted by the absolute value of the market value of the position of each instrument, cash flow, or leg, as applicable. The calculation must be carried out in accordance with the following expression:
    Weighted average of modified duration = (Σn |Market_Valueₙ| × Modified_Durationₙ)/ Σn | Market_Valueₙ| Where:

• n = corresponds to each operation and/or leg reported in the combination of fields 1 to 8.
• Market_Value ₙ = Market value of the individual position of component n.
• Modified_Durationₙ = Modified duration of component n.

6. In line with paragraph 1 of this Section II, all fillers of records 1 to 9 are adjusted to consider a length of 196 bytes.
7. In accordance with the previously exposed adjustments, the table of the header of file R07 is adjusted as follows:

Number of records

Number of records with code 01 in field 1
Number of records with code 02 in field 1
Number of records with code 03 in field 1
Number of records with code 04 in field 1
Number of records with code 05 in field 1
Number of records with code 06 in field 1
Number of records with code 07 in field 1
Number of records with code 08 in field 1
Number of records with code 09 in field 1
Number of records with code 10 in field 1

III. Entry into force
This Circular enters into force on October 1, 2026.

CATHERINE TORNEL LEÓN
PRESIDENT
FINANCIAL MARKET COMMISSION