Total land area:.................. 1,038,700 sq. km.
Official language:............... Spanish
Administrative divisions:..... 32 departments
Legal system:...................... Based on Spanish law; a new criminal code modeled after
was enacted in 1992-1993; judicial review of executive
and legislative acts; accepts compulsory ICJ jurisdiction,
with reservations.
Executive branch:............... Chief of state and head of governmentpresident, elected for
a four-year term by popular vote; cabinet.
Legislative branch:............ Bicameral CongressSenate (102 seats) and House of
Representatives (161 seats).
Judicial branch:................. Supreme Court of Justice (judges are selected from nominees
of the Higher Council of Justice for eight-year terms) and
Constitutional Court (guards integrity and supremacy of the
constitution, rules on constitutionality of laws, amendments to
the constitution and international treaties).
ECONOMIC PROFILE
Currency: Colombian peso (Col$)
GDP:.......... US$63.7 billion (1997)
Real GDP growth (at market prices): 3.2 (1997p)
GDP (average annual growth rate): 3.9 (1988-1997)
GDP per capita (1990 US$): 1,719.1 (1997)
Consumer price index (average annual growth rate): 18.5% (1997)
Nonfinancial public sector fiscal balance (% of current GDP): -0.1
(1997)
Money supply (M1) (% of current GDP): 8.7 (1997)
Interest rate (weighted average nominal deposit rate paid by commercial
banks, financial
corporations and commercial finance companies on all certificates of
deposit): 24.5 (1997p)
Current account balance: -US$4.9 billion (1997)
Trade balance: -US$2.3 billion (1997)
Main exports: oil, coffee, coal, gold
Main imports: intermediate goods, capital goods, consumer goods, fuels
and lubricants
Nominal exchange rate(Col$/US$) end of period: 1,293.6 (1997)
Real effective exchange rate (Index 1990=100): 65.9 (1997)
BANKING INSTITUTIONS
I. Banking Supervision
1. The Superintendencia
Bancaria is responsible for supervising banks.
2. The Superintendencia
is autonomous except in regulatory matters, which are the
sole responsibility of the Treasury Department.
3. The Superintendencia
reports to the president and to the Treasury Department.
4. Off-site inspections
take place monthly. On-site inspections take place when the
Superintendencia deems it necessary.
5. Colombia follows
the 25 Basle examination principles.
6. The Superintendencia
does not use CAMEL or another similar system in rating
banks. However, the inspectors use the same criteria as those examined
in
CAMEL, such as asset quality and capital adequacy. The Superintendencia
prepares a monthly report for each bank with analysis of loan portfolio
quality,
capital adequacy, earnings and return on equity. It also uses the GAP system
(comparison of asset and liabilities, interest rates and maturity schedule)
to
assess risk on liquidity, interest rates and foreign exchange rates.
II. Consolidated
Supervision
1. Colombia performs
consolidated supervision biannually, except when a home
office or holding company is a foreign institution.
2. Although prior
consent from Colombia is not required for a Colombian bank to
open or close a banking entity abroad, prior notice of 30 days is required.
3. Prior consent from
a foreign bank¹s home country is not required to open or close
a foreign bank in Colombia; however, Colombia does require that the bank
provide
a certificate from the home country¹s supervisory authority recognizing
the bank's
existence and legal representation.
4. Colombia gathers
information from affiliated cross-border banking establishments
III. Interest Rates
1. Interest rates
on loans are determined by the market. At certain times, however, the
Board of Directors of the Central Bank sets a maximum limit.
2. Interest rates
on deposits are determined by the market.
IV. Deposit Insurance
1. Deposits are insured
by the Fondo de Garantías de Instituciones Financieras
(FOGAFIN).
2. This insurance
is limited per depositor up to 7.5 million Colombian pesos (US$5,827
as of October 22, 1998).
V. Trade Finance
1. Trade finance is
defined as funding resources for production and/or
commercialization of products and services for import and export. Colombian
regulations treat working capital, pre-export finance and letters
of credit as
trade finance and as a regular credit.
2. Banks bear the
risk of trade finance vehicles.
3. There is no special
treatment for trade finance vehicles in cases of bank liquidation.
4. The banking system
does not make specific provisions or require reserves for
treatment of trade finance obligations during bank liquidation.
VI. Capital Adequacy
1. The minimum capital
required to open a bank is 32.6 billion pesos (US$25.3 million).
This amount is adjusted annually (in January with the consumer price index).
2. Banks formed before
1991 must maintain a minimum capital of 8 billion pesos
(US$6.2 million) to stay in operation. Banks formed in 1992 must maintain
10.1
billion pesos (US$7.9 million); in 1993, 12.7 billion pesos (US$9.9 million);
in 1994,
15.6 billion pesos (US$12.1 million); in 1995, 19.0 billion pesos (US$14.8
million);
in 1996, 22.8 billion pesos (US$17.7 million); and in 1997, 27.7 billion
pesos
(US$21.5 million).
3. The Colombian banking
system measures capital adequacy in only one category,
adequate capital. Assets are weighted according to five categories, depending
on the relative risk exposure of each asset. Contingent accounts are included
in the
computation. This is in contrast to systems in which there are varying
degrees of
adequacy. Additionally, adequate capital should be 11.11% of total and
contingent
assets. Capital adequacy is measured using the ratio of capital to total
risk-weighted
assets.
VII. Asset Quality
1. Loans are classified
as follows:
Commercial
A
Normal
adequate capacity of payment
0%
B
Sub-par
potential weaknesses
1%
C
Deficient credits
problems in payment
20%
D
Difficult recoverability not likely to recover
50%
E
Irrecoverable
loss
100%
Consumer
A
past due less than one month
0%
B
past due between one month and two months
1%
C
past due between two months and three months
20%
D
past due between three months and five months
50%
E
past due more than six months
100%
Real Estate and Mortgage
A
past due less than one month
0%
B
past due between one month and four months
1%
C
past due between four months and six months
20%
D
past due between six months and 12 months
50%
E
past due more than 12 months
100%
_____________________________________________________________
2. Banks must maintain
capital reserves equal to 50% of paid capital. Ten percent of
the earnings of each fiscal year must be transferred to capital reserves
to achieve
and/or maintain this requirement.
3. The legal lending
limit for unsecured loans is 10% of technical capital. The limit will
be increased to 30% if an additional 20% is well secured by defined types
of
collateral with prescribed margins.
4. Portfolios are
classified as available-for-sale, hold-to-maturity portfolio, trade and
non-negotiable investments.
5. Assets are valued
taking into account the following: whether the income is fixed or
variable, whether the asset is hedged, and the market value of the investment.
Additional considerations are the risk assessmentwhich is determined
by studying
the market riskissuer solvency risk and legal risk. Financial analysis
is determined
by taking into consideration future cash flows, the effective annual discount
rate
and the implicit future rate.
6. The valuation of
the investment portfolio affects the profit and loss statement
immediately.
VIII. Liabilities
1. Reserve requirements
are as follows:
Demand deposits
21%
Savings accounts
10%
CDT (term)
5%
Other deposits
21%
2. Any type of deposit
can be accepted in local currency; however, no deposits
can be accepted in foreigncurrency.
3. There is no limit
on the number of deposits a banking entity can accept.
4. There is no limit
on the level of concentration for specific types of deposits.