Colombia: Financial Conglomerates Law comes into force
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Colombia: Financial Conglomerates Law comes into force

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Colombian money, a background

Law 1870 of 2017, the Colombian Financial Conglomerates Law entered into force on February 6 2019. The Colombian Superintendence of Finance (SFC) has begun the process of supervising 13 financial conglomerates in the country, five of which are local and eight foreign. The SFC will supervise: Sura – Bancolombia Group, Aval Group, Bolívar financial conglomerate, BBVA Colombia, Fundación Social, Coomeva, Scotiabank Colombia, Itaú Colombia, BNP Paribas Colombia, BTG Pactual Colombia, Credicorp Capital Colombia, GNB Sudameris Colombia and Old Mutual Colombia.

Among other things, the Colombian Financial Conglomerates Law provides the SFC with the necessary powers to ensure an adequate level of capital that is consistent with the risks assumed by the financial conglomerate and the entities that integrate it; promote adequate risk management in financial conglomerates; and maintain appropriate corporate governance standards.

These new tools elevate the level of comprehensive and consolidated supervision of the SFC to the highest international standards. The stages of implementation of the Law will be developed in accordance with the entry into force of the corresponding regulatory framework, as follows:

  • February 6 2019: the supervision of financial conglomerates by the SFC began.

  • November 2019: financial holdings must demonstrate adequate capital.

  • February 6 2020: financial holdings must: (i) identify the quality of their subsidiaries to the financial conglomerate; and, (ii) create policies and exposure limits, and establish guidelines to manage conflicts of interest between the entities of the conglomerate.

The Colombian Financial Conglomerates Law is without doubt the greatest institutional challenge of relevance in recent years for the SFC. This is why the entity has been strengthening its technical capacity to supervise more complex business structures and the implicit risks involved, in addition to those that it has traditionally monitored in the past.

This supervision will be carried out through multidisciplinary work teams called 'supervision nuclei', which will comprehensively analyse the risk profile of each financial conglomerate, focusing mainly on systemic, concentration and strategic risks, as well as on the appropriate management.

Regarding the secondary regulation, derived from the law, Decree 774 of 2018 was issued to regulate the adequate capital of financial conglomerates. The challenge for financial holdings is to manage and plan their capital requirements against the risks assumed by the conglomerate. In relation to conflicts of interest, the regulation recognised the notion of corporate interest conflicts, which goes beyond the traditional definition of the conflict between administrator and entity, extending it to the conglomerate spectrum.


Carlos Fradique-Méndez

Carolina Restrepo Escobar

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