Published legislation and draft legislation - Colombia

Financial conglomerates’ linkages, conflicts of interest, exposure limits and risk concentration

Decree 1486/2018 - Ministry of Treasury and Public Lending

New regulations issued by the Ministry of the Treasury and Public Lending contain a number of different measures, amongst them criteria that must be taken into account when assessing the degree of linkage of a financial conglomerate. A linked entity is defined as one in which a financial conglomerate has a controlling or significant holding (10%).

Regarding conflicts of interest, the Board of Directors of the financial conglomerate should set the guidelines for an appropriate way of identifying, revealing, managing and overseeing any conflicts that may arise between the conglomerate and its linked entities. To this end, the guidelines should contain, at the least, the duties of disclosure, reporting and transparency, as well as the requirement to avoid actions that generate conflicts of interest.

The regulation also specifies the duty of financial groups to define policies for the exposures both of its own entities and its linked institutions, which must be approved by its Board of Directors. These policies must meet minimum guidelines, and also specify the following limits:

  • For exposures of entities within the financial conglomerate: ceiling of the conglomerate's tangible equity for accumulated exposures
  • For aggregated exposure with a linked party: maximum % permitted of the conglomerate's technical equity for the sum of exposures it holds with a linked party, the exposures being different from those pertaining to the financial conglomerate.

SFC, Colombia's Financial Authority, its monitoring and supervisory body, may require the different entities to make such corrections to their exposure policies and defined thresholds as it deems necessary, in line with the risk analysis it conducts. If these instructions are not followed, the Authority may impose commensurate penalties on the entities.