Colombia - Financial Sector Assessment
State-owned financial institutions (SOFIs) and broader interventions by the state need to play a more prominent role in supporting financial inclusion, green activities and fostering competition among private financial providers. While SOFIs have b...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099010004112241518/P17314204e921c0430aacb0c320cb7f9e13 http://hdl.handle.net/10986/37312 |
| Summary: | State-owned financial institutions
(SOFIs) and broader interventions by the state need to play
a more prominent role in supporting financial inclusion,
green activities and fostering competition among private
financial providers. While SOFIs have been generally
perceived as complementary to the private sector, their
recent incursion into direct lending and commercial
activities could raise competitive neutrality
considerations, if subsidies are involved. Improving product
design, incorporating best practices, strengthening
governance, and continuing to improve risk management would
support expansion of SOFIs activities in a non-distortionary
way. Interventions could be better coordinated to improve
efficiency, avoid duplication, and ensure alignment with
policy objectives. The formalization of Grupo Bicentenario
should contribute to these objectives. Monitoring and
evaluation (M&E) of public credit support policies and
programs could be strengthened. Finally, interest rate
controls and mandatory investment requirements to fund the
agricultural sector should be reviewed to limit distortions.
Colombia has a well-developed market for NPL management,
while the insolvency framework is in a stage of transition
and with areas for improvement. Strong and efficient NPL
resolution and insolvency frameworks are key for financial
sector stability and development. There is an active and
competitive market for sales of written-off loans, mainly in
unsecured segments, with an extensive availability of
investors and market infrastructure. Active resolution of
NPLs should continue to be encouraged by the SFC,
particularly for commercial NPLs, for which NPL management
by third-party providers is scarce. Several recent
regulations related to the insolvency framework have been
introduced, including temporary emergency decrees that make
considerable modifications to the corporate insolvency
system. This transitory situation creates uncertainty in the
users of the insolvency system, in particular large
corporations, and creditors. The incorporation of some of
the provisions from these temporary decrees into the
bankruptcy law would be advisable. The ultimate judge of
corporate insolvency is an administrative entity (the
Superintendency of Companies) which is specialized and
enjoys good reputation, but the rotation of its authorities
and the executive’s capacity to remove them poses
severe challenges for the predictability of its criteria.
Finally, the personal insolvency system requires urgent attention. |
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