Since September 21 2017, the Colombian regulatory authorities have focused their efforts on enacting regulations that provide supervision to financial conglomerates and demand certain financial and corporate governance standards from the companies and the vehicles involved in the composition of such groups.
Within that regulatory wave, the Colombian Congress enacted law 1870 of September 20 2017. According to law 1870, a financial conglomerate comprises a set of entities and/or vehicles that share a common controlling company. These can be national or foreign conglomerates that exercise an activity supervised by the Colombian Superintendence of Finance (SFC).
This law instructed the Ministry of Finance and Public Credit and the SFC, to issue additional regulations regarding:
- proper capital levels based on the activities developed by the companies comprising such conglomerates and their inherent risks;
- the criteria for excluding certain entities or vehicles from the comprehensive and consolidated supervision of the conglomerate;
- the parameters for determining the quality of the affiliated parties and the holding; and,
- the exposure and concentration risk limits of the conglomerate.
Under such mandate, the Ministry of Finance issued decree 248 of September 2 2018, and has published two additional decree projects. In the first one, the Ministry regulated the criteria for the exclusion of entities that should not be part of a conglomerate, giving a mandate to the SFC to enact regulations that determine the size, risk exposure and implication percentage that should be excluded from the conglomerate.
In the other decree project, the Ministry proposed minimum capital requirements, exposure and concentration risk limits and related party transactions limits, among other things, providing to the SFC a mandate to issue additional regulation on these matters.
This set of rules represents a great change in the surveillance perspective of the SFC, to include any entity that is part of a financial group, and even establishing an extra-territorial surveillance capacity for the SFC over foreign companies and vehicles. This regulation also requires a higher standard from the financial conglomerates. It requires them to review and amend their groups and their members as separate entities, in connection with risk limits, capital adequacy levels, related party transactions, and conflicts of interest, among other things. This regulation, therefore, implies substantial changes for local and foreign agents operating within the Colombian financial markets.
|Carlos Fradique-Ménde||María Camila Ordoñez|
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