SFC and BanRep Issue Regulations to Forestall Financial Risks
Colombia
19 marzo 2020

As a result of the COVID-19 pandemic, the Colombian Financial Superintendency (SFC, for its acronym in Spanish) and the Bank of the Republic of Colombia (BanRep, in Spanish) have issued a series of regulations to forestall financial risks. These modify the mechanisms for buying and selling securities in stock markets, give BanRep greater powers to carry out monetary expansion operations, and modify the liquidity management mechanisms of both entities. The regulations are already in force. 

The list of the regulations issued this week includes the following:

  • SFC Circular 6 of 2020. Companies operating in stock exchanges are authorized to manage and execute their clients’ orders to acquire and/or sell shares registered through the over-the-counter market, when their owner or investor so requests. The purpose of this is to guarantee the continuity of operations in the Colombian equity market in the face of unforeseen contingencies.
  • BanRep External Circular 148. This measure regulates the procedures for operations affecting the liquidity of the economy.  The document establishes that BanRep may temporarily reject offers for monetary expansion operations presented by entities having bought large amounts of foreign currency the day of an offer or in previous days. It also establishes guidelines for compliance with offers of interest-bearing term deposits. 
  • BanRep Resolution 4-2020. This entity may only intervene in the exchange market by performing foreign currency sales/purchase operations at market rates; sales of “put” or “call” options at market rates; sales of spot foreign currency through “FX Swap” contracts, at the rates established by Banco de la República. It may only sell foreign currency through “forward” contracts for financial compliance at market rates. 
  • BanRep Resolution 5-2020 and Resolution 6-2020. The BanRep may intervene in the foreign exchange market in order to regulate the liquidity of the financial markets, and issue and place representative foreign currency securities in accordance with the regulations issued by the Executive Board. These measures also define which entities can act as placement agents for open market operations in monetary expansion operations, on a temporary and definitive basis.
  • BanRep Circular DOAM-143. Pension and severance fund management companies either working on their own account or on behalf of third parties or managed funds are included as agents authorized to sell dollars in cash through FX Swap contracts. 
  • BanRep Circular DODM-148. This modifies the procedures for operations regulating liquidity in the economy and introduces changes in the schedules for the transfer of repo operation securities as well as for procedures related to securities denominated in foreign currency. 

Furthermore, the SFC has launched a public consultation on a circular and a technical document proposing modifications to the risk measurement mechanisms for financial markets. Those interested may send their comments until March 19, 2020 by writing to [email protected]. The proposal is for these risks to be measured through five risk factors: interest rate, exchange rate, stock price, portfolio investment, and credit default swap (CDS).

In addition, the Ministry of Finance published a decree for new deadlines to be added to the tax calendar, established by the Economic Growth Law passed in December 2019. The decree refers to compliance with tax obligations and covers income and complementary taxes as well as advance surcharge payments; filing and payment of tax standardization; deadlines for filing and paying wealth tax; declaration of goods and services abroad, and advance payments for the simple taxation regime (RST in spanish). 

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