Gómez-Pinzon & Asociados Bogotà
A new law instituting financial reform (Law 510 of August 3 of 1999) has been sanctioned by the President of the Republic. The law intends to provide the Colombian financial system with the necessary strength and versatility to successfully confront globalization. Likewise, bearing in mind the recent experience and difficulties suffered by the Colombian financial system, the reform provides the authorities with important powers of intervention to confront the different situations in which financial institutions may be involved in the future. The following are certain notable features of the law.
With respect to the solidity of financial institutions:
- An increase of the minimum capital will be required for financial institutions. Such capital must be maintained during the existence of the institution, as well as being adjusted to the Consumers' Price Index (CPI).
- Reduction of the time for liquidation procedures. Indeed, the law embodies detailed regulations concerning liquidation procedures, and gives wide powers to the Banking Superintendency in such matters. Likewise, the reform clarifies the purposes and procedures applicable to the Financial Guarantee Fund (Fogafín).
Concerning the autonomy and versatility of financial institutions:
- Entities under the surveillance of the Banking Superintendencywill be entitled to invest in corporate shares or mandatory convertible bonds issued on the stock markets.
- New mechanisms to ease the securitization of the Savings and Housing Corporation's list . The reform provides, among other things, for the following innovations:
i) The government is empowered to create, in a six-month term, a specialized long term housing financing system linked to the CPI. The government may adopt incentives and long-term profitability criteria for the investments designed for such purpose.
ii) The Banks and Savings and Housing Corporations are authorized to issue securities to raise funds for the construction and acquisition of housing.
iii) A new arbitration system will be created to settle any mortgage procedure conflicts that may arise.
iv) Protective measures for mortgage debtors will be introduced, such as mortgage credits may be transferable or repayable at any time.