On July 1, the Bank of the Republic of Colombia (BanRep, in Spanish) issued a circular modifying the haircuts (discounts on the market value) applicable to the Solidarity Bonds (TDS, for its acronym in Spanish). It also issued a circular assigning new functions to placement agents for open market operations and two resolutions regulating foreign exchange operations. These regulations are already in force. Simultaneously, the entity decided to cut interest rates from 2.75% to 2.50% in order to inject more liquidity to the market.
The first BanRep regulation eliminates TDS from the group of class B public debt securities, which have a term of one year or less. In addition, it eliminates the maximum and minimum levels of haircuts for TDS, initially set at 1.5% and 8%, and establishes a 10% haircut on TDS, Security Bonds and Peace Bonds.
The second regulation seeks to govern the way risk is controlled in Open Market Operations and Liquidity Operations for the Normal Operation of the Payment System. It establishes that the legal representative and fiscal auditor of the placement agents for open market operations must inform BanRep when the entity fails to comply with any maintenance requirements. Finally, the third and fourth regulations govern the roles of the BanRep and the Central Counterparty Risk Chambers (CRCC) in foreign exchange market operations.