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THE NEW FINANCIAL SUPERVISOR IN COLOMBIA Washington D.C. June 6, 2006 Index Financial System main trends Pre-merge financial scenario New structure for financial supervision The challenges today The challenges tomorrow Total Assets Under Surveillance Market Share Trend 95/05

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the new financial supervisor in colombia

THE NEW FINANCIAL SUPERVISOR IN COLOMBIA

Washington D.C. June 6, 2006

index
Index
  • Financial System main trends
  • Pre-merge financial scenario
  • New structure for financial supervision
  • The challenges today
  • The challenges tomorrow
trading platforms market share 97 06
Trading Platforms Market Share: 97-06

SEN: Central Bank wholesale government debt trading system.

MEC: Stock Exchange retail fixed income and equity trading system opened to all financial sector market participants plus some large portfolio holders (government agencies).

The market was demutualized as the unified Colombian Stock Exchange started operations in July 2001.

index12
Index
  • Financial System main trends
  • Pre-merge financial scenario
  • New structure for financial supervision
  • The Challenges today
  • The Challenges tomorrow
pre merge financial scenario
Pre-merge financial scenario
  • Stable macroeconomic and political environment
  • Relevant institutional savings growth
  • New challenges for risk management among market participants, regulators and supervisors
  • Strong growth of fixed income and equity trade with important implications and demands on market conduct regulation and supervision
  • Market demutualization
  • Basic market infrastructure development (Trading platforms, Central Depositories, Payment Systems, Centralized Asset Valuation)
pre merge financial scenario14
Pre-merge financial scenario
  • Finance Minister commitment to renew regulation and supervision for the Financial Sector
  • Need for consensus building among former Banking and Securities Superintendencies and Finance Ministry
  • Overall Governance of the Financial Sector
    • Policy definitions – Congress
    • Regulation – Finance Ministry
    • Supervision – Banking/Securities Superintendences
pre merge financial scenario15
Pre-merge financial scenario
  • Different kinds of financial sector institutions perform similar activities.
  • Common activities exposed to common risks.
  • Financial System stability and consumer protection highly dependent on adequate and specialized risk management
index16
Index
  • Financial System main trends
  • Pre-merge financial scenario
  • New structure for financial supervision
  • The Challenges today
  • The Challenges tomorrow
main objectives
Main Objectives
  • Avoid/Eliminate regulatory arbitrage.
  • Financial system stability.
  • Consumer protection.
slide18

Value Chain

RESEARCH AND

DEVELOPMENT

CORE

SUPERVISORY

STRUCTURE

FINANCIAL

SYSTEM

R

E

G

U

L

A

T

I

O

N

C

U

S

T

O

M

E

R

SUPERVISORY

METHODOLOGIES DESIGN /

RISK ANALYSIS

RESEARCH /

MARKET ANALYSIS /

INFO ADMINISTRATION

REGULATORY

COORDINATION

CONSUMER

PROTECTION

SUPPORT AREAS

SECRETARY GENERAL AND ADMINISTRATION

LEGAL AFFAIRS

INFORMATION TECHNOLOGY

slide20

OVERALL

MANAGEMENT

CONSULTATIVE

FINANCIAL SUPERINTENDENT

OF COLOMBIA

GROUP

COORDINATION

ADVISORY

COORDINATION

FOR THE

FINANCIAL SYSTEM

LEGAL

ORIGIN

INTERNAL AFFAIRS

DISCIPLINARY CONTROL

CONSUMER

PROTECTION

I & T

INFORMATION

SYSTEMS UNDER

OPERATIONS UNDER

SFC Organizational Structure

LEGAL

AFFAIRS

R&D

SECRETARY

GENERAL

SUPERVISION

METHODOLOGIES DESIGN / RIKS ANALYSIS

ADMINISTRATIVE AND

FINANCIAL

JUDICIAL

REPRESENTATION

INFO ANALYSIS

UNDER

HUMANS

RESOURCES

APPEALS

NORMATIVE

COORDINATION

UNDER

DOCTRINE

UNDER DIRECTORATE

INSTITUTIONAL / PRUDENTIAL

GLOBAL RISKS

INSURANCE

AND

REINSURANCE

AGENTS

SECURITIES INTERMEDIARIES AND OTHER AGENTS

MARKET RISK

AND INTEGRITY

CONGLOMERATES

RISK AND

CORPORATE

GOVERNANCE

SECURITIES ISSUERS,

PORTFOLIOS

AND OTHER AGENTS

MONEY

LAUNDERING

RISK

CREDIT RISK

PENSION AND

SEVERANCE FUNDS

FIDUCIARY AGENTS

CREDIT

INSTITUTIONS

OPERATIONAL

RISK

,

MARKET RISKS

SUPERVISORY

TECNOLOGY

AND OPERATIONAL

RISKS

SUPERVISORY

MONEY LAUNDERING

PREVENTION/

CONTROL

SUPERVISORY

CREDIT

RISK

SUPERVISORY

CONGLOMERATES

RISKS

SUPERVISORY

CREDIT

INSTITUTIONS

INSURANCE

AGENTS

ACCESS

TO MARKET

SECURITIES

INTERMEDIARIES/

SELF REGULATED

AGENTS

DEFINED BENEFIT /

DEFINED CONTRIBUTION

SYSTEMS

CONDUCT

SUPERVISORY

PROCESSES RISK

CORPORATE

GOVERNANCE

INSURANCE

TCHNICHAL RISKS

SECURITIES ISSUERS

SUPERVISORY

CREDIT

RISK

SUPERVISORY

CREDIT

INSTITUTIONS

FIDUCIARIES

SUPERVISORY

LEGAL

INFRAESTRUCTURE

SUPPLIERS /MONEY EXCHANGE AGENTS

LEGAL

INVESTMENT

PORTFOLIO

LEGAL

LEGAL

LEGAL

LEGAL

slide21

CONSULTATIVE

OVERALL

MANAGEMENT

FINANCIAL SUPERINTENDENT

ADVISORY

GROUP COORDINATION

COORDINATION

FOR

THE FINANCIAL

SYSTEM

LEGAL ORIGIN

INTERNAL

CONTROL

DISCIPLINARY

CONTROL

Present SFC Governance Structure

EXTERNAL COMMITTEES

MANAGERIAL COMMITTEES

external committees
External Committees
  • Consultative: representatives of the financial sector associations (10)
  • Advisory: independent professional advisors (5)
  • Coordination for the Financial System:
    • Finance Minister
    • Central Bank Governor
    • Fogafin Director
    • Financial Superintendent
slide23

Managerial Committees

The Committees are divided in:

sfc new proposed governance structure
SFC New Proposed Governance Structure
  • Board of Directors
  • Fixed term and clearly defined appointment procedures for head of SFC.
  • Accountability rules
  • Judicial protection regime for Supervisors
  • Strengthened administrative and budgetary independence.
  • Supervision of competition practices and rules within the financial sector.
index25
Index
  • Financial System main trends
  • Pre-merge financial scenario
  • New structure for financial supervision
  • The Challenges today
  • The Challenges tomorrow
main challenges of initial phase
Main Challenges of Initial Phase
  • Cohesion and motivation of the executive group, explanation and promotion of the new conceptual framework both within and outside SFC
  • Active commitment of the SFC staff to the definition and development of particular objectives by areas.
  • Assimilation of new functions, team-work and coordination among the new areas.
  • Financial System understanding of the SFC new structure, functions and responsibilities.
the challenges today
The Challenges Today
  • Full development of Law 964 of 2005 – Securities Law
    • Self-regulated organization for securities markets
    • Promotion of information disclosure.
    • Trading systems improvements
    • Organization of a fully developed futures market
  • Adoption of international standards for prudential regulation.
  • New supervision methodologies design
  • ISO certification of supervision core processes.
index28
Index
  • Financial System main trends
  • Pre-merge financial scenario
  • New structure for financial supervision
  • The challenges today
  • The challenges tomorrow
the challenges tomorrow
The Challenges Tomorrow
  • Consolidation of the new risk based supervision model.
  • Widespread adoption of Corporate Governance standards, both within SFC and supervised institutions.
  • Consolidated supervision of conglomerates.
  • Development of long term approach to issues related with pension funds and annuities.
  • Strengthened regulation for portfolio management and market conducts.
  • Enhanced information disclosure.