Featured Product

    IMF Publishes Reports on 2019 Article IV Consultation with Colombia

    April 29, 2019

    IMF published its staff report and selected issues report under the 2019 Article IV consultation with Colombia. Against the backdrop of a sound banking system, Directors commended the authorities for continued advances in financial regulation and supervision; these developments include the steps taken to align regulation with Basel III standards over time and the implementation of the Conglomerates Law, which should further strengthen the financial system.

    The staff report highlighted that credit growth is expected to increase and non-performing loans (NPLs) are expected to gradually decline in line with the economic recovery. Banks remain well-capitalized with provisions stable at approximately 130% of NPLs and core tier 1 and regulatory capital having been raised to 13.2% and 18.9% of risk-weighted-assets (RWAs), respectively. SFC, the financial supervisor of the country, is implementing the Conglomerates Law and Basel III capital and liquidity standards, in line with previous staff advice. SFC has the authority to supervise 13 identified financial conglomerates covered by the conglomerates law. These entities will have to comply with capital adequacy requirements by November 2019 while the guidelines for conflicts of interest within financial conglomerates will be introduced in February 2020.

    To bring capital standards closer in line with Basel III, the parameters for calculating RWA will be redefined and the definition of technical capital will be modified to exclude intangible assets in February 2020. The net effect of these two changes will raise most banks’ capital ratios. Meanwhile, capital conservation buffers and systemic risk buffers for domestic systemically important banks (D-SIBs) will be gradually introduced over a four-year period (February 2020 to February 2024). The liquidity coverage ratio (LCR) has been modified with the assumed run-off rates now varying with deposit type. By June 2020, banks will also have to comply with the net stable funding ratio (NSFR). The authorities revealed their intention to introduce a capital requirement for operational risk for banks, with a decree outlining the specific details to be published in the fourth quarter of 2019. 

    The staff report mentions that the planned regulatory measures should further strengthen the regulatory framework. The introduction of the Conglomerates Law is an important step to strengthen the stability of the financial system and mitigate risks associated with Colombian banks’ exposure to Central America. The gradual implementation of additional capital buffers is appropriate to prevent credit supply bottlenecks. However, redefining technical capital and risk weighted assets in 2020 will temporarily lower required capital ratios for most banks until Basel III capital standards are fully implemented. Heightened supervisory vigilance would, therefore, be appropriate during this transitional period.

    With NPLs elevated, SFC should remain alert and proactive to ensure that problem assets continue to be sufficiently provisioned for. Furthermore, staff welcome the SFC’s continued commitment to closely monitor the modified loans portfolio to avoid build-up of excess credit risk. The authorities communicated that they will be more reliant on financial supervision during the transition period for new financial regulations. SFC expressed its continued commitment to exercise vigilance following a period of rising NPLs and to continue to closely monitor banks’ modified loans portfolios. The authorities also agreed that during the transition period under which additional capital buffers are introduced, financial stability would be more reliant on financial supervision.

     

    Related Links

    Keywords: Americas, Colombia, Banking, Basel III, NPLs, Article IV, Conglomerates Law, Regulatory Capital, RWA, LCR, NSFR, IMF

    Featured Experts
    Related Articles
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    ECB to Consider Climate Risks When Reviewing Collateral Framework

    In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.

    September 17, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    ACPR Publishes Corrective Version of RUBA Taxonomy

    The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7487