Financial

Standards
Report

Colombia
January 2009

www.eStandardsForum.org
 Financial Standards Report Colombia
January 2009

Table of contents

I. Principles of Corporate Governance

II. Objectives and Principles of Securities Regulation
III. Effective Insolvency and Creditor Rights Systems
IV. Insurance Core Principles
V. Anti-Money Laundering/Combating Terrorist Financing Standard
VI. Core Principles for Effective Banking Supervision
VII. Core Principles for Systemically Important Payment Systems
VIII. Special Data Dissemination Standard
IX. Code of Good Practices on Transparency in Monetary Policy
X. Code of Good Practices on Transparency in Fiscal Policy
XI. International Financial Reporting Standards
XII. International Standards on Auditing

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 Financial Standards Report Colombia
January 2009

Principles of Corporate Governance

LEVEL OF COMPLIANCE: ENACTED

Summary has played a central role in the regulatory field; the

Confederation of Chambers of Commerce (CCC); and the
Since 1995 Colombia has made progress with its corporate
Center for International Private Enterprise (CIPE). The Latin
governance regime, particularly for listed companies. A new
American Banking Federation (FELABAN), reported on its
set of corporate governance provisions was established with
website that the CCC and ICPE have encouraged good
the Securities Market Law of 2005, introducing the concept of
corporate governance practices within the private sector.
independent directors among other regulations. Then, in 2007
the Superintendency of Finance (SF), with the collaboration
In a 2007 paper for an Organization for Economic Co-
of private entities, published the Country Code. The Code
operation and Development (OECD) conference in Bogota,
incorporated international best practices and aimed to improve
Andrés Bernal recapped the developments in corporate
the enforcement of corporate governance rules. The code
governance in Colombia over the past decade. In 1995, Law
follows a "comply or explain" model. Prior to that, in 2001,
No. 222 of 1995 modified the Commerce Code by including
Colombia had established a minimum corporate governance
rules dealing with corporate governance. This change was
disclosure regime for companies that wished to be eligible
later complemented by Resolution No. 275 of 2001, which
for pension fund investments. It has encouraged institutional
definitively introduced good corporate governance in
investors to assume the role of active shareholders. However,
Colombia. Resolution No. 275 establishes that issuers intending
weaknesses in the corporate governance regime remained and
to receive financing from pension funds should publish a code
led to an official proposal for reform in this area. Colombia
of corporate governance. Four years later, in 2005, Congress
needs to adopt internationally accepted auditing and
approved the new Securities Market Law No. 964, which
accounting standards, improve minority shareholder rights, and
created a new set of rules regarding corporate governance.
strengthen the enforcement of rules in certain areas such
According to Ferrero et al, writing in 2005, this law became a
as insider trading. As of April 2008, Congress was analyzing
pillar of the corporate governance legal framework. Finally, in
draft Bill No. 165 of 2007, which proposes the adoption of
2007, the Colombian Corporate Governance Code - known
International Financial Reporting Standards (IFRS), previous
as the Country Code, or Código País - was released by the
International Accounting Standards. This would take place by
SF in an effort to strengthen the enforcement of corporate
2010 for larger companies and 2012 for small and medium
governance rules.
enterprises. Private sector efforts in Colombia have been led
the Confederation of Chambers of Commerce through a The 2007 report by Bernal explains that different codes of
number of activities designed to raise private-sector awareness good corporate governance practices have emerged over time.
as to the importance of adopting good corporate governance There are four different codes: the 2001 Code of the National
practices. Federation of Chambers of Commerce, which applies to
issuers; the Small and Medium Enterprises (SMEs) Code of
General Overview 2003; the Andean Code of 2004 for listed and non-listed
As far back as 2003, the World Bank was reporting in its companies; and the Country Code of 2007, which applies to
Report on the Observance of Standards and Codes on listed companies. The SF reported in 2007 that the Country
Corporate Governance (ROSC) that the recognition of Code follows a "comply-or-explain" model applicable to issuer
corporate governance issues was growing in Colombia. The companies that must submit information to the SF regarding
main agencies that have been promoting corporate governance the implementation of corporate governance practices through
issues have been the Superintendency of Finance (SF), which the annual Survey of Best Corporate Practices. According to

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the 2007 Bernal report for the OECD, the Country Code
has become the single official benchmark for corporate
governance since 2007. Bernal's report further asserts that,
according to an international consultant hired by the SF to
review the code, Colombia´s new code is in line with best
international practices. The International Finance Corporation's
(IFC) 2006 report cautions that the good governance codes
now have to be internalized in Colombian organizational
culture.
In its 2003 report, the World Bank states that there are
sanctions related to insider trading and self dealing, since it is
forbidden to execute operations using privileged information.
Also, managers need a two-thirds majority of shareholder
votes at the Annual General Meeting (AGM) to authorize
the purchase of company shares. Nonetheless, there are
insufficient instruments to detect insider dealings. Colombia
lacks an electronic surveillance system and has no method
for controlling practices like "front running." A 2005 report by
the International Monetary Fund (IMF) remarks that business
groups have adopted more transparent practices as a
consequence of market liberalization. However, enterprises
are commonly family-owned or run by a small number of
shareholders, while pyramidal structures and cross-
shareholding are frequently observed. The 2003 World Bank
report also cautioned that Colombia's accounting and auditing
practices were substandard. However, Dinero Magazine's
website discloses that, in April 2008 the Congress began
consideration of a project to adopt International Financial
Reporting Standards (IFRS), previous International Accounting
Standards (IAS).
Capital markets in Colombia are relatively shallow. Trading
volume represented 10 percent of GDP in 2006 and
capitalization reached 41.6% of GDP in the same year. As
of 2006, 90 companies were listed on the Colombian Stock
Exchange (BVC) and, as Uribe notes in his 2007 report,
concentration levels are high: the ten largest companies
represent 67.73 percent of market capitalization. The Investor
Protection Index is a subcomponent of the World Bank's 2008
Doing Business Indicators, and consists of three aspects of
investor protection: transparency of transactions (Extent of
Disclosure Index), liability for self-dealing (Extent of Director
Liability Index) and shareholders' ability to sue officers and
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Financial Standards Report Colombia
January 2009
directors for misconduct (Ease of Shareholder Suits Index). The
indices range between 0 and 10, with higher values indicating
greater disclosure, greater liability of directors, and greater
power of shareholders to challenge the transaction, and
therefore, better investor protection. Colombia scores 8.0 in
the disclosure index, against a regional average of 4.2 and an
OECD average of 6.4. It scores 2.0 in the Director Liability
Index, against a regional average of 5.0 and an OECD average
of 5.1; and it scores 9.0 in the Shareholder Suits Index, against
a regional average of 6.0 and an OECD average of 6.5.
Principle: Principle I: Ensuring the
Basis for an Effective Corporate
Governance Framework
[Insufficient Information]
According to the 2005 report by Ferrero et al., Colombia
has made considerable efforts toward developing a proper
regulatory framework for corporate governance. Several
Colombian public entities have become leaders in this respect.
The 2007 Bernal report identifies several pieces of legislation
relating to this enterprise: Law No. 222 of 1995, which
modified the Colombian Commerce Code and included such
corporate governance provisions as regulations covering the
election of boards of directors, proxy-voting, and disclosure of
information; Resolution No. 275 of 2001 requires issuers who
wish to receive investments from pensions funds to adopt a
corporate governance code; and Securities Market Law No.
964 of 2005. This last, according to the OECD's 2007 report,
"created a complete set of corporate government rules that
has small room for self-regulation" (p.7). The 2003 World
Bank report notes that Resolution No. 275 establishes that
companies must implement mechanisms to protect and
guarantee equal treatment of shareholders, and the company
must publish these mechanisms in its code of good governance.
Ferrero et al. cite three more resolutions: Resolution No. 116
of 2002, which gives stockholders the right to deliberate and
vote freely and spontaneously, Resolution No. 72 of 2001,
which requires equitable treatment for all stockholders, and
Resolution No. 157 of 2002, which establishes punishments
such as the sale and purchase of transactional securities.
According to the 2007 Bernal report, Law No. 222, Resolution
No. 275, and Law No. 964 address the creation of codes
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 Financial Standards Report Colombia
January 2009

containing corporate governance provisions. Bernal describes CIPE are the primary organizations promoting corporate
four different types of Codes of Good Corporate Governance. governance in Colombia. Overall, however, the publicly
First is the 2001 Code of the National Federation of Chambers available information does not specifically address Colombia's
of Commerce , which applies to issuer companies, is based compliance with this principle.
on OECD principles, and sets out practices that correspond
to developed legal system; the SME Code of 2003, which Principle: Principle II: The Rights of
was created by a committee drawn from private and official Shareholders and Key Ownership
institutions and serves as a general guide for small and medium
enterprises; the Andean Code of 2004, which applies to listed
Function
and non-listed companies; and the Country Code of 2007, [Insufficient Information]
which applies to listed companies. Bernal's report asserts that
In its 2003 ROSC, the World Bank rates Colombia's
the Country Code is an attempt to unify market standards
observance with the sub-principles of Principle II as follows.
and eliminate asymmetries created by previous regulations. The
"Basic Shareholder Rights" is rated as "Largely Observed",
code follows a "comply or explain" model, requiring that issuers
denoting that only small shortcomings are seen and these do
submit information on the code to the SF through the annual
not raise questions about the authorities' ability and intent to
survey of Best Corporate Practices. Reporting must either
achieve full observance in the short term. "Rights to Participate
provide the level of compliance achieved, or offer reasons
in Fundamental Decisions" and "Shareholder's Annual General
for failing to adopt Country Code recommendations. The
Meeting Rights" are rated as "Partially Observed," indicating
results of these surveys are posted on the SF website. Bernal
that while the legal and regulatory framework complies with
states that the model of corporate governance established
the Principle, practices and enforcement diverge. However,
by the code "should strengthen Colombian capital markets,
"Disproportionate Control Disclosure" and "Functioning
bringing new issuers to the market and facilitate local and
Control Arrangements" are rated as "Materially Not
international investment" (p.11). Furthermore, the Code has
Observed." This indicates that, despite progress, shortcomings
become the single official benchmark of corporate governance
are sufficient to raise doubts about the authorities' ability to
since 2007. Bernal adds that, according to an international
achieve observance. "Cost/benefit to voting" is rated as "Not
consultant, Colombia´s new code is in line with best
Observed." However, the World Bank's assessment was
international practices. The IFC's 2006 report cautions that
conducted prior to the enactment of the 2005 Securities
good governance must now be internalized in Colombian
Market Law and the 2007 publication of the Country Code.
organizational culture. The report shows the results of a 2005
Therefore, Colombia's current level of compliance with this
survey, which reveals that only 48% of Colombia's largest
principle cannot be assessed.
companies acknowledge the concept of corporate governance.
The World Bank report notes that all shares are registered,
Bernal reports that corporate governance matters are
and entry into the share registry constitutes legal proof of
supervised by the SF, which was created in 2005 with the
ownership. Share registration can be done through the Central
merger of the Superintendency of Banks and the
Depository. The World Bank notes that shares can be freely
Superintendency of Securities. The functions of this new entity
transferred, but this transfer is not handled on a delivery-
are established in Decree No. 4327 of 2005. The FELABAN
versus-payment (DVP) basis. Therefore, according to the
2007 report notes that the SF has played an essential role
World Bank, "the clearance and settlement cycle should be
in regulating corporate governance. In addition, Bernal notes
lowered substantially and DVP adopted in order to minimize
that the BVC and the CCC have special programs devoted
transfer risks" (p.4). The World Bank further asserts that
to promoting corporate governance, whereas the Colombian
companies have different reporting obligations. All registered
Insurance Companies Federation is implementing a program
information is publicly available for a small fee. Through the
to create guidelines on corporate governance for insurance
AGM, shareholders elect the members of the board of
companies. The FELABAN report adds that the CCC and
directors. This election is carried out using an "electoral

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quotient" system designed to guarantee proportional
representation for each shareholder. The 2005 Ferrero report
states that removal of board members follows a simple
majority rule. However, Article 39 of the new Securities
Market Law No. 964 establishes that listed companies can
adopt alternative mechanisms, consistent with a World Bank
recommendation that had been made prior to the passage of
the law.
The World Bank found that Colombia addresses the sub-
principle "rights to participate in fundamental decisions,"
through the requirement that an Extraordinary General
Meeting be called to make fundamental decisions. In addition,
shareholders can raise issues that have not been included on
the agenda of these meetings. However, some decisions can be
taken unilaterally by the board of directors. The World Bank
has recommended that meetings address only those topics
included on the agenda, and that in cases concerning the
acquisition or sale of assets of considerable value must be
approved by the shareholders. Most decisions are taken by
simple majority. Bernal reported in 2007 that, according to
provisions of Law No. 964, the board must respond to
proposals submitted by shareholders (or a group) representing
more than 5 percent of capital.
The Ferrero report asserts that, in the context of the AGM,
there are several decisions that must be referred to the
shareholders. These include the election and removal of board
members, approval of financial statements, establishment of
the company's dividend policy, and determination of corporate
changes. The World Bank 2003 report identifies some
shortcomings in this regard and recommends that there should
be an extension of the notice period for AGMs; that an
informative agenda should be available to the shareholders
in advance; that the number of shareholders necessary to
call for meetings should be lowered from its current level
of 20 percent; and that, although it is allowed to vote by
mail and electronic mechanisms, distance voting mechanisms
should be more functional. The 2007 Country Code addresses
some of these recommendations. It suggests that companies
should provide shareholders with information containing board
of directors candidates, when available, as well as financial
information relating to the issues on the meeting agenda. The
World Bank also reports that multiple voting and voting caps
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Financial Standards Report Colombia
January 2009
are not allowed. However, given that important shareholders
are not required to provide details regarding their beneficial
ownership, complicated ownership structures make it nearly
impossible to analyze the relationship between cash flow rights
and control. The 2007 Oxford Analytica report notes that
there is no legislation establishing the principle of one vote
per share or that refers to cumulative voting or proportional
representation. In addition, the World Bank reports that
shareholders' agreements must be delivered to the company
and can be reviewed by shareholders. However, shareholders
are not always informed about these arrangements. The
Ferrero report states that anti-take over devices are not
regulated by law in Colombia. Finally, regarding institutional
investors, the 2003 World Bank report recommends that
legislative reforms dealing with pension funds should address
the roles and responsibilities of institutional investors. The 2007
OECD report on Institutional Investors in Colombia notes that
the SF was evaluating a reform in this area that sought to
impose "a much stronger responsibility on behalf of Institutional
Investors of analyzing the corporate governance structure as
one of the criteria used in the investment decision making
process" (p. 4). The draft legislation includes the obligation
for institutional investors to formally express the weight given
to corporate governance practices when deciding on an
investment and to keep records of the analysis made in this
respect.
Principle: Principle III: The Equitable
Treatment of Shareholders
[Insufficient Information]
In its 2003 report, the World Bank rates Colombia's
observance with the sub-principles of Principle III as follows:
"All shareholders should be treated equally" is rated as "Partially
Observed," indicating that while the legal and regulatory
framework complies with the Principle, practices and
enforcement diverge. "Prohibit insider trading" is rated as
"Materially not Observed," denoting that, despite progress,
shortcomings are sufficient to raise doubts about the
authorities' ability to achieve observance. The sub-principle
"Board and managers disclose interests" is rated as "Not
Observed." However, since the World Bank's assessment was
conducted prior to the enactment of the 2005 Securities
Market Law and the 2007 publication of the Country Code,
6

Colombia's level of compliance with this principle cannot be
assessed. The World Bank states that shareholders have broad
legal protections. They can contest decisions that violate the
law or infringe on their collective rights and interests. Class
action suits can be undertaken under the provisions of Law
No. 472 of 1998. Moreover, the bylaws provide information
regarding the various types of shares and their related rights.
Special meetings of the affected shareholders, with a majority
rule scheme, must be arranged in order to change the rights of
a particular class of shares. Nonetheless, the World Bank notes
that shareholder compensation is unavailable in practice, due
to the cost of litigation and the length of court procedures.
The World Bank report also states that managers require a
2/3 majority vote at the AGM in order to purchase shares of
their company. The execution of operations using privileged
information is forbidden and monetary sanctions can be
applied. Employees that misuse information are subject to a
fine. Since 2000 the unauthorized use of information is
considered a criminal act. However, as of 2003, only one
case of insider trading and self-dealing was sanctioned. This
is partially explained by the lack of sufficient mechanisms to
detect insider dealings, given that Colombia does not have
an electronic surveillance system or a method for controlling
practices like "front running." Additionally, the World Bank
states that "surveillance is complicated by the fact that banks
and insurance companies may trade over the counter" (p.8).
Furthermore, evidence indicates that insider trading is likely a
common practice, mainly in fixed income operations. Finally,
the World Bank reports that managers are not allowed to take
part in any transaction that may cause conflicts of interests, but
may receive loans from the firm. Nevertheless, this provision
is rarely observed. The report states that Colombia has not
reached a desired level of transactional transparency and
regulation. As a result, the World Bank recommends that
directors inform the board and abstain from voting when facing
conflicts of interest. Section 17 of the Country Code addresses
this issue because it requires directors to provide the board
with information related to direct or indirect relationships with
the company, providers, or other interested groups.
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Financial Standards Report Colombia
January 2009
Principle: Principle IV: The Role of
Stakeholders in Corporate
Governance
[Insufficient Information]
The 2003 World Bank ROSC rates Colombian compliance
with this principle as follows: Concerning the sub-principles
"Stakeholders' rights respected" and "Access to information,"
Colombia meets all essential criteria and shows no deficiencies.
The sub-principle "Performance enhancement" is rated as
"Largely Observed," indicating that only minor shortcomings
are observed, whereas "Redress for violation of rights" is rated
as "Partially Observed" because, although Colombia's
regulatory framework complies with the principle, practices
and enforcement diverge. Shareholder, employee, and creditor
rights are established in the Labor Code, the Commercial Code
as amended, the Corporate Restructuring Law No. 550 of
1999, and other laws and regulations. The World Bank states
that employees are considered creditors and may secure their
wages when a corporate restructuring occurs. Furthermore,
creditors and employees have voting rights in cases of debt
restructuring, and employees are represented in the liquidation
process. The report notes that there are no specific regulations
dealing with the involvement of shareholders in governance
issues. The Constitution and other laws contain provisions
protecting consumer groups, creditors, and others. According
to a 2007 report by the Superintendency of Companies and
the Ministry of Commerce, Industry and Tourism, Law No.
1116 was approved in 2006 to establish a new corporate
insolvency regime. This new framework is less favorable to
debtors and addresses various shortcomings of the prior law.
In 2003 the World Bank had stated that "environmental
legislation is considered advanced for the region. Class-action
type mechanisms permit affected parties to seek protection
and/or compensation, but the court system is slow and
inefficient" (p.9). However, the World Bank's assessment was
conducted prior to the enactment of the 2005 Securities
Market Law and the 2007 publication of the Country Code.
Therefore, Colombia's current level of compliance with this
principle cannot be assessed.
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Principle: Principle V: Disclosure and Colombian General Accepted Accounting Principles (GAAP),
Transparency but states that these GAAP are not in line with International
Accounting Standards. A 2008 Dinero Magazine article notes
[Insufficient Information]
that the Colombian accounting system is a hybrid between
the now non-applicable GAAP, and International Financial
The 2003 World Bank ROSC rates Colombian compliance
Reporting Standards (IFRSs). Consequently, the financial
with this principle as follows: The sub-principle "Fair and timely
statements are confusing and difficult to understand. The
dissemination" is rated as "Observed," denoting that all essential
World Bank concurs with this perception, noting that market
criteria are met without significant deficiencies. "Disclosure
participants find information quality to be poor. The World
standards" is rated as "Partially Observed," denoting that
Bank adds that "the country's legal and regulatory requirements
although the legal framework is adequate, practices and
on accounting are not conducive to high-quality financial
enforcement diverge. In addition, "Standards on accounting
reporting" (p.2). At the time of the World Bank assessment,
and auditing" and "Independent audit annually" are "Materially
Colombia was attempting to improve its corporate financial
not Observed," because shortcomings raise doubts about the
reporting regime. The Dinero website discloses that, as of
authorities' ability to comply with the principles. However,
April 2008, Congress was reviewing Bill No. 165, a proposal
the World Bank's assessment was conducted prior to the
for all Colombian enterprises to adopt IFRSs. The proposed
enactment of the 2005 Securities Market Law and the 2007
schedule for implementation establishes 2010 for adoption by
publication of the Country Code, so Colombia's current level
large companies and 2012 for medium and small enterprises.
of compliance with this principle cannot be assessed.
The World Bank addresses Colombia's performance with
The World Bank notes that the Commercial Code regulates
regard to external auditors by noting that the AGM establishes
the required contents of a company's annual report. In the
the functions of the "revisor fiscal [fiscal reviewer]" including
case of listed companies, Resolution No. 400 of 1995 stipulates
the following points: "(1) certification of the quality of internal
that the report shall include a balance sheet, income statement,
controls defined broadly (including processes and operations);
cash flow statement, statement of changes in equity, and notes.
(2) certification that the firm complies with laws and bylaws;
A report of the general auditor is also included, together
(3) signing of financial statements together with the legal
with an analysis of the company goals. Companies must also
representative" (p.11). However, since the "revisor fiscal" gives
disclose risk factors and risk management and must publish
instructions to the company, there is a conflict of interest
the certification of the general auditor for internal control.
because the roles of the instructor and auditor are played by a
Furthermore, while the names of board members and key
single individual. The independence of the "revisor fiscal" is also
executives are published, details regarding their remuneration
a matter of concern, particularly when his or her salary is paid
and governance structures are lacking. In cases of a merger
by the company. Finally, the World Bank finds that, regarding
or spin-off, companies must disseminate information relating
the channels for disseminating information, companies are
to creditors' rights, and notice must be delivered to creditors
required to send to the SF and the BVC a variety of reports,
so that they can participate in any restructuring meetings.
including financial statements. Material information is provided
The 2006 IFC report, based on a survey of Colombian listed
to the market immediately.
companies, notes that the surveyed companies consider the
information made available to the market to be sufficient and
see no need for further requirements. Principle: Principle VI: The
Responsibilities of the Board
The 2005 IMF report states that Colombia's financial
[Insufficient Information]
information requirements need to converge with international
standards and adds that improvements are required in order In its 2003 ROSC, the World Bank rates Colombia's
to eliminate inconsistencies. The World Bank report of 2003 observance with the sub-principles of Principle VI as follows:
notes that Decree No. 2649 of 1993 promulgated the "Treat all shareholders fairly," "The board should fulfill certain

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key functions," and "The board should be able to exercise
objective judgment" are rated as "Materially not Observed,"
meaning that there are shortcomings that raise doubts about
the authorities' ability to comply with the sub-principles. The
sub-principle "Acts as due diligence care" is rated as "Partially
Observed," denoting an adequate legal framework but a lack
of appropriate enforcement. The sub-principle "Ensure
compliance with law" is rated as "Largely Observed," since
there are only minor shortcomings. "Access to Information"
is rated as "Observed." However, since the World Bank's
assessment was conducted prior to the enactment of the
2005 Securities Market Law and the 2007 publication of the
Country Code, Colombia's current level of compliance with
this principle cannot be assessed. Also, the World Bank report
remarks that board decisions that affect different types of
shareholders must be in line with the law and bylaws ensuring
equitable treatment. However, in practice, directors are
connected with large shareholders and defend their interests.
Moreover, there is no legislation that forces directors to take
into account stakeholders' interests. However, there is a
provision in Resolution No. 275 that recommends that
companies recognize stakeholders' rights.
Regarding the functions of boards of directors, the World
Bank notes that board responsibilities are more specifically
detailed in company bylaws. The legal framework elaborates
little on this topic, although the Commercial Code "empowers
the board to sign and execute contracts on behalf of the
company and take all decisions needed to fulfil corporate
interests" (p.13). According to the World Bank report, the
board of directors must foster the firm's purpose, control the
compliance of norms and fulfilment of duties, abstain from
accessing privileged information and participating in forbidden
activities, and treat shareholders equally and in concordance
to their rights. In addition, the Commercial Code entrusts the
board with the responsibility of electing the legal representative
or CEO. However, market participants assert that this function
is often executed by the controlling shareholders. The
Commercial Code establishes that the managers have the
responsibility to assure the integrity of accounting and financial
reporting systems. In this respect, the Ferrero report states
that the board of directors is required to meet at least once
a year to set the company's objectives. The 2007 SF report
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Financial Standards Report Colombia
January 2009
notes that the Country Code recommends that the Board of
Directors meet once per month.
Article No. 4 of Law No. 964 defines the concept of
"independent director" and establishes criteria for determining
the characteristics that a person must fulfill in order to be
considered as independent. In addition, it establishes that at
least 25 percent of the board be comprised of independent
directors. The SF website discloses that, as of October 2006,
57 percent of Colombian issuers complied with this rule.
However, Ferrero et al. reported in 2005 that the concept
of non-executive director does not exist in Colombia. With
respect to board committees, the report remarks that they
are not established by law. However, Law No. 964 requires
that listed companies form an audit committee tasked with
evaluating compliance by internal audit programs. The 2003
World Bank report states that board members can access
confidential information. In practice, however, the use of this
kind of data is controlled by the CEO. The Country Code
recommends that board members have the right to access
information prior to board meetings.
Sources of Assessment
Bernal, A., "Country Report: Voluntary Corporate Governance Code in
Colombia," The 2007 Meeting of the Latin American Corporate
Governance Roundtable, Medellín, Colombia, October 10-11, 2007.
Available from OECD website. Accessed on June 2, 2008. (Bernal 2007)
http://www.oecd.org/dataoecd/4/4/39741294.pdf
Oxford Analytica, "Shareholder And Creditor Rights In Key Emerging
Markets 2006," Oxford: Oxford Analytica, January 2007. Available from
California Public Employee Retirement System (CalPers) website. Accessed
on June 2, 2008 (OA 2007)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
World Bank, "Report on the Observance of Standards and Codes:
Corporate Governance Country Assessment, Colombia," World Bank,
August 2003. Available from World Bank website.(World Bank 2003)
http://www.worldbank.org/ifa/rosccgcol.pdf
Relevant Organizations
Central Depository - Depósito Central de Valores (Deceval) (website in
Spanish only)
http://www.deceval.com.co/
Colombian Confederation of Chambers of Commerce - Confederación
Colombiana de Cámaras de Comercio (Confecámaras) (website in Spanish
only)
http://www.confecamaras.org.co/
9

Colombian Insurance Companies Federation - Federación de
Aseguradores Colombianos (Fasecolda) (website in Spanish only)
http://www.fasecolda.com/fasecolda/
Corporate Governance Colombia - Gobierno Corporativo Colombia
http://www.gobiernocorporativo.com.co/
Ministry of Commerce, Industry and Tourism - Ministerio de Comercio,
Industria y Turismo (MCIT) (website in Spanish only)
http://www.mincomercio.gov.co/eContent/home.asp
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co
Stock Exchange of Colombia - Bolsa de Valores de Colombia (BVC)
(website in Spanish only)
http://www.bvc.com.co/
Superintendency of Finance - Superintendencia Financiera (SF)
http://www.superfinanciera.gov.co/
Relevant Legislation/Regulation
Country Code, 2007 - Código País, 2007 (in Spanish only)
http://www.superfinanciera.gov.co/Codigopais/textos/codig...
Framework Code of Good Corporate Governance for Small and Medium
Enterprises, 2003 - Código Marco de Buen Gobierno Corporativo para
Pymes, 2003
http://www.cipe.org/regional/lac/pdf/SME_CG_Code.pdf
http://www.kpmg.com.co/files/documen_corp_gov/release/cm_...
Guidelines for an Andean Code of Corporate Governance, 2005 -
Lineamientos para un Código Andino de Gobierno Corporativo, 2005 (in
Spanish only)
http://gc.caf.com/upload/pubs/Lineamientos%20para%20un%20...
Securities Market Law No. 964, 2005 - Ley del Mercado Público de
Valores No. 964, 2005(in Spanish only).
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Decree by which the Superintendency of Banks merges with the
Superintendency of Securities No, 4327, 2005 - Decreto por el cual se
fusiona la Superintendencia Bancaria en la Superintendencia de Valores y se
modifica su estructura No. 4327, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Commercial Code of Colombia Decree No. 410, 1971 - Código de
Comercio de Colombia Decreto No. 410, 1971 (in Spanish only)
http://alcaldiademonteria.tripod.com/codigos/comercio/cod...
Decree regulating Accounting in general and issuing Generally Accepted
Accounting Principles or Norms No. 2649, 1993 - Decreto por el cual se
reglamenta la Contabilidad en General y se expiden los Principios o
Normas de Contabilidad Generalmente Aceptados en Colombia No.
2649, 1993 (in Spanish Only)
http://www.actualicese.com/normatividad/2001/decretos/D26...
Resolution establishing the requirements needed by Corporate Public and
Private Bodies to receive investments from Pension Funds No. 275, 2001 -
Resolución por la cual se establecen los requisitos que deben acreditar las
Personas Jurídicas Públicas y Privadas que pretendan ser destinatarias de la
inversión de recursos de los Fondos de Pensiones No. 275, 2001 (in
Spanish only)
http://www.superfinanciera.gov.co/boletin/re027501.htm
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Resolution modifying Resolution No. 400 of 2005, No. 72, 2001 -
Resolución por la cual se modifica la resolución 400 de 1995, No. 72, 2001
(in Spanish only)
http://www.superfinanciera.gov.co/boletin/re007201.htm
Bill adopting International Financial Reporting Standards for the
presentation of financial statements No. 165, 2007 - Proyecto de Ley por
la cual el Estado Colombiano adopta las Normas Internacionales de
Información Financiera para la presentación de informes contables No.
165, 2007 (in Spanish only)
http://www.actualicese.com/normatividad/2007/10/24/proyec...
Supplementary Sources
Del Valle Borráez, C. and Carvajal Cordoba, M. "Updated White Paper
Progress Report - Colombia" The Seventh Meeting of the Latin American
Corporate Governance Roundtable, Buenos Aires, Argentina, June 22-23,
2006. Available from OECD website. Accessed on August 28, 2008. (Del
Valle Borráez and Carvajal Cordoba 2006)
http://www.oecd.org/dataoecd/17/56/37329678.pdf
Dinero Magazine Website. Last Updated on March 28, 2008. Accessed on
June 5, 2008. (Dinero Magazine website)
http://www.dinero.com/wf_InfoArticulo.aspx?IdArt=46084
FELABAN, "Prácticas de Buen Gobierno Corporativo en el Sector
Financiero [Good Corporate Governance Practices in the Financial
Sector]," Federación Latinoamericana de Bancos, October 2007. Available
from FELABAN website. Accessed on June 2, 2008. (FELABAN 2007)
http://www.felaban.com/pdf/buen_gobierno.pdf
Ferrero, E., et al, "Sources of Corporate Governance Rules/Practices in
Colombia, First Part," Boletín 62, Centro Nacional de Gobierno
Corporativo Confecámaras, 2005. Available from Gobierno Corporativo
website. Accessed on June 2, 2008. (Ferrero et al 2005a)
http://www.gobiernocorporativo.com.co/documentos/Boletine...
Ferrero, E., et al, "Sources of Corporate Governance Rules/Practices in
Colombia, Second Part," Boletín 63, Centro Nacional de Gobierno
Corporativo Confecámaras, 2005. Available from Gobierno Corporativo
website. Accessed on June 2, 2008. (Ferrero et al 2005b)
http://www.gobiernocorporativo.com.co/documentos/Boletine...
International Finance Corporation, "El Gobierno Corporativo en Colombia
[Corporate Governance in Colombia]," IFC, 2006. Available from IFC
website. Accessed on June 3, 2008. (IFC 2006)
http://www.ifc.org/ifcext/corporategovernance.nsf/Attachm...
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 23, 2008. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
Ministry of Finance and Public Credit, "Exposición de Motivos: Proyecto de
Ley de Reforma Financiera [Exposition of Reasons: Financial Reform Bill],"
MHCP, n. d. Available from Stock Exchange of Colombia website.
Accessed on May 28, 2008. (MFPC n.d.)
http://www.bvc.com.co/bvcweb/administracion/editor/homeFi...
Organization for Economic Co-operation and Development, "Country
Report: The Role of Institutional Investors in Promoting Corporate
Governance in Colombia," Meeting of the Latin American Corporate
10

Governance Roundtable, Medellín, Colombia, October 10-11, 2007.
Available from OECD website. Accessed on June 2, 2008. (OECD 2007)
http://www.oecd.org/dataoecd/3/35/39742010.pdf
Presidency of Colombia Website. Last updated on May 29, 2008. Accessed
on May 29, 2008. (Presidency website)
http://www.presidencia.gov.co/sne/2005/noviembre/28/04282...
http://www.presidencia.gov.co/sne/2005/junio/23/04232005.htm
Superintendency of Companies and Ministry of Commerce, Industry and
Tourism, "Cartilla: Nuevo Régimen de Insolvencia Empresarial, Ley 1116 de
2006 [Chart: New Corporate Insolvency Regime, Law 1116 of 2006],"
Superintendency of Companies, 2007. Available from Legislación y
Jurisprudencia website. Accessed on July 23, 2008. (SC&MCIT 2007)
http://www.legislacionyjurisprudencia.com/temas/2007/Cart...
Superintendency of Finance, "Presentación del Código País [Country Code
Presentation]," Bogotá: SF, May 2007. Available from SF website. Accessed
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
on June 4, 2008. (SF 2007)
http://www.superfinanciera.gov.co/Codigopais/presentacion...
Superintendency of Finance Website. Last updated on April 8, 2008.
Accessed on June 5, 2008. (SF website)
http://www.superfinanciera.gov.co/GobiernoCorporativo/ley...
http://www.superfinanciera.gov.co/Codigopais/informeanual...
Uribe G., J. M., "Indicadores Básicos de Desarrollo del Mercado Accionario
Colombiano [Basic Indicators for the Development of the Stock Market],"
BanRep, September 2007. Available from Central Bank of Colombia
website. Accessed on June 6, 2008. (Uribe 2007)
http://www.banrep.gov.co/documentos/publicaciones/report_...
World Bank, "Doing Business: Colombia," 2008. Available from the Doing
Business website. Accessed on June 23, 2008. (World Bank 2008)
http://www.doingbusiness.org/ExploreEconomies/?economyid=46
11
 Financial Standards Report Colombia
January 2009

Objectives and Principles of Securities Regulation

LEVEL OF COMPLIANCE: ENACTED

Summary countries, especially in equity" (p. 24), stated the FSSA. The IMF
attributed this to structural factors and some lags in market
The International Monetary Fund (IMF) published an updated
infrastructure, stating that it would be necessary to modernize
Financial System Stability Assessment for Colombia in 2005.
the securities-market regulatory framework in order to
At the time of the assessment, the Colombian capital market
increase liquidity and stimulate investment. A review of the
regulatory regime was under review. The IMF noted that the
regulatory regime was underway in 2004, and the IMF noted
proposed reform of the securities regulatory framework would
that the proposed reforms would bring it into line with best
bring it in line with best international practices so as to
international practices, promote efficiency and integrity,
promote efficiency and integrity, protect investors' rights, and
protect investors' rights, and prevent systemic risks. The
prevent systemic risks. The Securities Market Law No. 964 was
reforms took effect when the Securities Market Law No. 964
passed by Congress in July 2005. A 2005 presentation by Flórez
(SML) was passed by Congress in July 2005. A 2005
Villegas of the Ministry of Finance and Public Credit asserted
presentation by Flórez Villegas of the Ministry of Finance and
that the law brings Colombia into closer compliance with
Public Credit (MHCP) agreed with the IMF findings, stating that
the principles of the International Organization of Securities
the law brings Colombia closer to the principles promulgated
Commissions, eliminates ambiguities, fully implements the
by the International Organization of Securities Commissions
principles related to supervisory objectives, and adequately
(IOSCO) since it eliminates ambiguities, fully implements the
regulates several other issues. In addition, in April 2008, the
principles related to supervision objectives, and adequately
government sent to Congress a draft Financial Reform Bill
regulates other issues. In a 2008 report, the MHCP asserted
that aimed to strengthen the rights of financial consumers.
that, in April, 2008 the Colombian government sent to
Congress is also analyzing a draft bill that seeks to reconcile
Congress a draft Financial Reform Bill that aimed to adopt an
Colombia's accounting standards with international practices.
integral scheme for protecting financial consumers.
The Superintendency of Finance was created in 2005 through
the merger of the Superintendency of Securities and the
The Superintendency of Finance (SF) was created on January
Superintendency of Banks. The new agency began operating in
1, 2006, by the merger of the Superintendency of Securities
January 2006. It is in charge of supervising the financial system,
and the Superintendency of Banks. It is in charge of supervising
organizing and developing the Colombian stock market, and
the financial system, organizing and developing the Colombian
protecting investors.
stock market and protecting investors. An undated document
available from the SF website discloses that this institution is a
General Overview technical entity attached to the MHCP and is administratively
In 2005, the International Monetary Fund (IMF) published an and financially autonomous. According to the Latin American
update to its Financial System Stability Assessment (FSSA) Securities Markets Institute website, Colombian legislation
which had been produced in 1999 but not published. The regulating the securities market consists of the SML; Decree
IMF report noted that while private capital markets have been No. 4327 of 2005, creating the Superintendency of Finance;
developing, they still suffered from a lack of depth and liquidity. Financial System Organic Statute Decree No. 663 of 1993,
According to the report, the main reason for this lack of which regulates the financial system; Decree No. 2739 of 1991,
development was the limited supply of investment securities by which establishes the functions and structure of the regulator;
local corporations and deficiencies in clearance and settlement and other resolutions that establish specific provisions.
systems. The banking sector still dominates the distribution of
capital and "secondary market liquidity lags behind comparable

www.estandardsforum.org 12

In 2001, the stock exchanges in Bogotá, Cali, and Medellín
were merged to create the Colombian Stock Exchange (BVC),
which is located in Bogotá. Colombia's capital market, though
still underdeveloped, is growing as is evident in rising market
capitalization from US$14.1 billion in 2003 (equivalent to 16%
of GDP), to US$58.5 billion (43% of GDP) in 2007. However,
long-term corporate and project finance is still principally
available only from banks. The U.S. Department of Commerce
(DoC) noted in its 2008 Country Commercial Guide that loans
with a maturity in excess of five years are seldom issued. Only
the largest of Colombia's companies can tap the local stock or
bond markets to meet their finance needs, but the majority
does so via the banking system, by reinvesting their profits,
and through suppliers' credit. According to the DoC report,
the government "envisions revising the regulation of private
pension funds to allow them to participate more actively in
the capital markets." The IOSCO website discloses that the
SF is an IOSCO member and a member of the President's
Committee, the Emerging Markets Committee, and the Inter-
American Regional Committee within IOSCO.
Principle: 1. The responsibilities of
the regulator should be clear and
objectively stated.
[Enacted]
An undated document on the SF website notes that the SF
is in charge of supervising the financial system, organizing and
developing the Colombian stock market, and protecting
investors. This institution is a technical entity attached to the
MHCP but with administrative and financial autonomy. It was
created in 2005 by Decree No. 4327, after the merger of
the Superintendency of Securities and the Superintendency
of Banks, which constituted Colombia's first step toward the
implementation of a new and integrated supervisory scheme
in Colombia. The functions of the SF are set out in provisions
of several laws: Decree No. 2739 of 1991; Financial System
Organic Statute Decree No. 663 of 1993; the SML of 2005;
and regulations modifying and amending these norms. Florez
Villegas reported for the MHCP in 2005 that IOSCO Principle
1, concerning the objectives of the regulator, is incorporated
in its entirety in Article No. 1 of the SML, including the aim
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
of protecting investigators; assuring that the market is fair,
equitable and transparent; and reducing systemic risk.
Principle: 2. The regulator should be
operationally independent and
accountable in the exercise of its
functions and powers.
[Insufficient Information]
The 2005 presentation by Flórez Villegas noted that the SML
brings Colombia closer to IOSCO's principles, but does so
without contradicting the provisions contained in the
Constitution. Florez Villegas asserts that the SML does not
contradict OSCO's Principle 2 and clarifies the regulatory
framework. The IMF's 2007 Article IV Consultation report
noted that Colombia's government has proposed financial
reforms that include strengthening the independence of the
SF via a fixed-term appointment for the superintendent. The
IMF suggested that the superintendent's term of appointment
be changed so that it overlaps with the presidential term. This
would further strengthen the superintendents autonomy. The
IMF also supported the proposal to develop and explicitly state
a fixed set of criteria for by which a superintendent may be
dismissed. However, neither the IMF report nor the Florez
Villegas document explicitly addresses Colombia's compliance
with this principle.
Principle: 3. The regulator should
have adequate powers, proper
resources and the capacity to
perform its functions and exercise its
powers.
[Insufficient Information]
The 2005 presentation by Flórez Villegas claims that the SML
does not contradict IOSCO Principle 3. However, the
document does not directly address Colombia's level of
compliance with this principle. In its 2005 FSSA update, which
was issued prior to the implementation of the SML, the IMF
recommended that the regulator be given sufficient resources
in order to perform supervision, enforcement, and securities
settlement as a short-term recommendation.
13

Principle: 4. The regulator should
adopt clear and consistent regulatory
processes.
[Insufficient Information]
The 2005 presentation by Flórez Villegas stated that the SML
does not contradict IOSCO's Principle 4 and contributes to
the elimination of regulatory ambiguities. Moreover, the report
declared that the Law establishes provisions that are close to
the IOSCO's principles. Nevertheless, this information is not
sufficient to address Colombia's compliance with this principle.
Principle: 5. The staff of the regulator
should observe the highest
professional standards, including
appropriate standards of
confidentiality.
[Insufficient Information]
According to the 2005 presentation by Flórez Villegas, the
SML does not contradict IOSCO's Principle 5 and contributes
to the elimination of regulatory ambiguities. Nevertheless, this
information is not sufficient to address Colombia's compliance
with this principle.
Principle: 6. The regulatory regime
should make appropriate use of Self-
Regulatory Organizations (SROs)
that exercise some direct oversight
responsibility for their respective
areas of competence, to the extent
appropriate to the size and
complexity of the markets.
[Insufficient Information]
Per the 2005 presentation by Flórez Villegas, the SML
establishes adequate provisions related to self-regulatory
organizations (SROs) and provides the government with the
authority to set out rules concerning this issue. In a 2008
report by Rosillo Rojas of the Colombian Stock Market Self-
Regulator (AMV), the self-regulatory framework has evolved
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
since 2001. In that year, the three stock exchanges in Bogotá,
Cali, and Medellín were merged in the BVC. In 2004, a number
of supervisory bodies were created within the BVC, including a
disciplinary chamber, a supervisory commission, and a market
governor. In 2005, the SML established that all financial
intermediaries must be self-regulated, and the AMV was
created in 2006 with the purpose of regulating, supervising,
sanctioning, and certifying stock market intermediaries.
However, the above information does not directly address
Colombia's level of compliance with this principle.
Principle: 7. SROs should be subject
to the oversight of the regulator and
should observe standards of fairness
and confidentiality when exercising
powers and delegated
responsibilities.
[Insufficient Information]
A 2005 presentation by Rosillo Rojas of the AMV asserted
that entities must comply with the following requirements for
becoming SROs: demonstrate their importance to the market
and have certain number of members; possess enforcement
and registry mechanisms; have an adequate representation
of its members; appropriate fee and payment scheme; and
comprehensive rules. Article No. 25 of the SML establishes
that the regulator must supervise the correct operation of
SROs. The Rosillo Rojas' 2008 presentation noted that the
Law provides an extensive legal framework related to self-
regulation. According to the SF website, it has signed an
agreement with the AMV to harmonize their functions,
promote mutual cooperation, and avoid duplication of tasks.
However, there is insufficient information to directly address
Colombia's level of compliance with this principle.
Principle: 8. The regulator should
have comprehensive inspection,
investigation and surveillance powers.
[Insufficient Information]
Prior the enactment of the SML, the 2005 IMF report had
recommended that the regulator be provided with sufficient
14
 Financial Standards Report Colombia
January 2009

resources to supervise stock market intermediaries. Writing
in 2005 for of the then-existing Superintendency of Securities
(which later merged with the Superintendency of Banks to
form the SF), Del Valle reported that any actor who intended
to operate in the stock market must subscribe to the Stock
Market Information Integral System, on which the SF relies, in
part, in order to conduct its supervision. With the enactment
of the SML, securities supervision in Colombia now follows
a three-pronged approach: (1) the permanent supervision of
exchanges among others; (2) the control of issuers; and, (3) the
supervision by activity, covering among others asset managers.
However, the publicly available information does not directly
address Colombia's level of compliance with this principle.
Principle: 9. The regulator should
have comprehensive enforcement
powers.
[Insufficient Information]
According to Del Valle's 2005 presentation, the SML led to
the implementation of a new scheme of sanctions that have
eliminated ambiguities in the previous regulation. However,
the information does not directly address Colombia's level of
compliance with this principle.
Principle: 11. The regulator should
have authority to share both public
and non-public information with
domestic and foreign counterparts.
[Insufficient Information]
The 2005 IMF report argued that Colombia should promote
local and international information sharing. The SF website lists
various agreements that have been reached between the SF
and other local and foreign supervisory entities in order to
facilitate the exchange of information. . However, the publicly
available information does not directly address Colombia's level
of compliance with this principle.
Principle: 12. Regulators should
establish information sharing
mechanisms that set out when and
how they will share both public and
non-public information with their
domestic and foreign counterparts.
[Insufficient Information]
See Principle 11.

Principle: 10. The regulatory system Principle: 13. The regulatory system
should ensure an effective and should allow for assistance to be
credible use of inspection, provided to foreign regulators who
investigation, surveillance and need to make inquiries in the
enforcement powers and discharge of their functions and
implementation of an effective exercise of their powers.
compliance program. [Insufficient Information]
[Insufficient Information]
See Principle 11.
The SF's 2008 Management Report noted that the SF
performs off-site supervisions through various quantitative and
qualitative warning models. Moreover, the 2005 presentation
by Flórez Villegas noted that supervision and enforcement
issues are adequately established in the SML. However, the
publicly available information does not directly address
Colombia's level of compliance with this principle.

www.estandardsforum.org 15

Principle: 14. There should be full,
timely and accurate disclosure of
financial results and other
information that is material to
investors' decisions.
[Enacted]
In 2003, the World Bank published a Report on the
Observance of Standards and Codes on Corporate
Governance (ROSC-CG) benchmarking Colombia against the
Principles of Corporate Governance promulgated by the
Organization for Economic Cooperation and Development
(OECD). The report asserted that Colombia "partially
observed" the OECD principle which reads: "The corporate
governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the
corporation." This rating indicates that, while the legal and
regulatory framework complies with the Principle, practices
and enforcement diverge from it. Colombia's Commercial
Code Decree No. 410 of 1971 requires companies to publish
an annual report that includes: (1) a balance sheet; (2) income
statement; (3) cash flow statement; (4) statement of changes in
equity; (5) the external auditor's report; and (6) a discussion on
management and company's objectives. Also, Resolution No.
400 of 1995 requires that listed companies disclose financial
information to the SF the BVC. However, information
regarding employees and stakeholders do not need to be
published. According to market participants who use the
reports, data quality is poor.
Principle: 15. Holders of securities in
a company should be treated in a fair
and equitable manner.
[Enacted]
In its 2003 ROSC-CG, the World Bank found Colombia to
have "partially observed" the OECD principle regarding the
"equitable treatment of shareholders." This finding indicates
that, while the legal and regulatory framework complies with
the principle, practices and enforcement diverge from it. On
the other hand, the principle related to insider trading and the
prohibition of self-dealing is rated as "Materially not Observed,"
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
meaning that despite progress, shortcomings raise doubts
about the authorities' ability to achieve observance. According
to the report, the shareholders' meeting agenda always
includes (1) the approval of financial statements; (2) election
of the members of the board of directors; and (3) selection
of the external auditor. The report also noted that, in theory,
shareholders can seek redress and initiate suits against firm's
managers via an extraordinary general meeting called by
shareholders with at least 20 percent of capital. However, the
cost and the length of the court procedures inhibit the use of
such mechanisms.
Principle: 16. Accounting and
auditing standards should be of a high
and internationally acceptable
quality.
[Intent Declared]
As per the 2003 World Bank ROSC on Accounting and
Auditing (ROSC-AA) Colombia's generally accepted
accounting principles (GAAP) are established by Decree No.
2649 of 1993. However, those standards differ materially from
International Accounting Standards (currently International
Financial Reporting Standards or IFRSs). Several accounting
rules are also established by different public bodies and, since
those standards differ, companies must use different accounting
practices when they provide information to those entities. Also,
policymakers believe that Colombian accounting principles are
substandard. In addition, Colombian auditing standards do not
comply with International Standards on Auditing (ISAs).
According to the Dinero website, however, as of March, 2008
Colombia's Congress was analyzing draft Bill No. 165 of 2007,
which establishes a procedure for the adoption of IFRSs. The
legislation asserts that Colombian companies must implement
international standards by 2010 for large companies, whereas
small and medium enterprises must do so by 2012.
16

Principle: 17. The regulatory system
should set standards for the eligibility
and the regulation of those who wish
to market or operate a collective
investment scheme.
[Insufficient Information]
According to the 2005 Flórez Villegas presentation, the SML
regulates issues or provides the government with the authority
to establish rules concerning collective investment schemes,
in line with IOSCO's objectives and principles. Nevertheless,
the publicly available information is not sufficient to address
Colombia's compliance with this principle.
Principle: 18. The regulatory system
should provide for rules governing
the legal form and structure of
collective investment schemes and
the segregation and protection of
client assets.
[Insufficient Information]
According to the 2005 Flórez Villegas presentation, the SML
regulates issues or provides the government with the authority
to establish rules concerning collective investment schemes
in line with IOSCO's objectives and principles. The Jaramillo
Ossa 2006 presentation stated that the SML requires collective
investment managers to redress third parties' assets in cases
of insolvency, bankruptcy, and other similar situations.
Nevertheless, this information is not sufficient to address
Colombia's compliance with this principle.
Principle: 19. Regulation should
require disclosure, as set forth under
the principles for issuers, which is
necessary to evaluate the suitability
of a collective investment scheme for
a particular investor and the value of
the investor’s interest in the scheme.
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
According to the 2005 Flórez Villegas report, the SML
regulates issues or provides the government with the authority
to establish rules concerning collective investment schemes in
line with IOSCO's objectives and principles. Nevertheless, this
information is not sufficient to address Colombia's compliance
with this principle.
Principle: 20. Regulation should
ensure that there is a proper and
disclosed basis for asset valuation and
the pricing and the redemption of
units in a collective investment
scheme.
[Insufficient Information]
See Principle 19.
Principle: 21. Regulation should
provide for minimum entry standards
for market intermediaries.
[Insufficient Information]
Regarding market intermediaries, the 2005 Flórez Villegas
presentation notes that Art. 4 of the SML sets out provisions
or enables the government to issue norms regulating market
intermediaries that are in line with IOSCO's objectives and
principles. Nevertheless, this information is not sufficient to
address Colombia's compliance with this principle.
Principle: 22. There should be initial
and ongoing capital and other
prudential requirements for market
intermediaries that reflect the risks
that the intermediaries undertake.
[Insufficient Information]
See Principle 21.
Principle: 23. Market intermediaries
should be required to comply with
17
 Financial Standards Report Colombia
January 2009

standards for internal organization Principle: 26. There should be

and operational conduct that aim to ongoing regulatory supervision of
protect the interests of clients, exchanges and trading systems which
ensure proper management of risk, should aim to ensure that the
and under which management of the integrity of trading is maintained
intermediary accepts primary through fair and equitable rules that
responsibility for these matters. strike an appropriate balance
[Insufficient Information] between the demands of different
market participants.
See Principle 21. In addition, according to an April 2008 MHCP
[Insufficient Information]
press release, the government sent to Congress a draft
Financial Reform Bill that introduces a new regime for
See Principle 25.
protecting financial consumers, detailing their rights and
financial service providers' obligation regarding the diffusion of
information and the quality of services.
Principle: 27. Regulation should
promote transparency of trading.
Principle: 24. There should be [Insufficient Information]
procedures for dealing with the There is insufficient publicly available information as to
failure of a market intermediary in Colombia's compliance with this principle.
order to minimize damage and loss
to investors and to contain systemic Principle: 28. Regulation should be
risk. designed to detect and deter
[Insufficient Information] manipulation and other unfair
trading practices.
See Principle 21.
[Insufficient Information]

Principle: 25. The establishment of There is insufficient publicly available information as to

trading systems including securities Colombia's compliance with this principle.
exchanges should be subject to
regulatory authorization and Principle: 29. Regulation should aim
oversight. to ensure the proper management of
[Insufficient Information] large exposures, default risk and
market disruption.
According to the 2005 presentation by Flórez Villegas, the
[Insufficient Information]
SML establishes provisions for secondary markets in line with
IOSCO's objectives and principles. Nevertheless, the publicly There is insufficient publicly available information as to
available information is not sufficient to address Colombia's Colombia's compliance with this principle.
compliance with this principle.
Principle: 30. Systems for clearing
and settlement of securities

www.estandardsforum.org 18

transactions should be subject to
regulatory oversight, and designed to
ensure that they are fair, effective
and efficient and that they reduce
systemic risk.
[Enacted]
Prior to the implementation of the SML, the 2005 IMF report
had noted that the draft version of the law would addresses
most of the shortcomings of Colombia's legal framework and
would improve compliance with the Core Principles for
Systematically Important Payment Systems. Moreover, the
report noted that the draft law included provisions covering
such issues as netting and protection of the system against
bankruptcy procedures. The BVC concurred with this
assessment in its 2005 report, asserting that the law
incorporates best international practices concerning
operational security. In addition, the BVC stated that the law
increases the safety of negotiations, improves efficiency and
efficacy, and facilitates the fulfillment of contracts.
Sources of Assessment
Flórez Villegas, "La Regulación en la Nueva Ley del Mercado de Valores
[The New Securities Law Regulation]," Ministry of Finance and Public
Credit, July 2005. Available from Superintendency of Finance website.
Accessed on July 10, 2008. (Flórez Villegas 2005)
http://www.superfinanciera.gov.co/seminarios/leyvaloresfl...
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287, Washington, D.C. : IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 23, 2008. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
World Bank, "Report on the Observance of Standards and Codes:
Corporate Governance Country Assessment, Colombia," World Bank,
August 2003. Available from World Bank website. Accessed on July 1,
2008. (WB 2003b)
http://www.worldbank.org/ifa/rosccg_col.pdf
World Bank, "Colombia: Report on the Observance of Standards and
Codes - Accounting and Auditing," World Bank, July 2003. Available from
the World Bank website. Accessed on July 1, 2008. (WB 2003a)
http://www.worldbank.org/ifa/rosc_aa_col.pdf
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Relevant Organizations
Colombian Stock Exchange - Bolsa de Valores de Colombia (BVC)
(website in Spanish only)
http://www.bvc.com.co/
Colombian Securities Market Self-Regulator - Autorregulador del Mercado
de Valores de Colombia (AMV)
http://www.amvcolombia.org.co/index.php?pag=home&id=12%7C...
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co
Superintendency of Finance - Superintendencia Financiera (SF)
http://www.superfinanciera.gov.co
Relevant Legislation/Regulation
Colombian Constitution, 1991 - Constitución Política de Colombia, 1991
(in Spanish only)
http://www.ideaspaz.org/proyecto03/boletines/download/bol...
Securities Markets Law No. 964, 2005 - Ley del Mercado de Valores
No.964, 2005 (In Spanish Only)
http://www.gobiernocorporativo.com.co/_private/ley_964_05...
Financial System Organic Statute, Decree No. 663, 1993 - Estatuto
Orgánico del Sistema Financiero, Decree No. 663, 1993 (in Spanish only)
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Commerce Code, Decree No. 410, 1971 - Código de Comercio, Decreto
No. 410, 1971 (in Spanish only)
http://encolombia.com/derecho/CodigoComercioColombiano/Co...
Decree merging the Colombian Superintendency of Banks with the
Superintendency of Securities, No. 4327, 2005 - Decreto por el cual se
fusiona la Superintendencia Bancaria de Colombia en la Superintendencia
de Valores y se modifica su estructura No. 4327, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Decree adapting the structure of the National Securities Commission to
the new Superintendency No. 2739, 1991 - Decreto por el cual se adecúa
la estructura de la Comisión Nacional de Valores a su nueva naturaleza de
superintendencia No. 2739, 1991 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Resolution updating and unifying the norms issued by the General
Department of the Superintendency of Securities No. 400, 1995 -
Resolución por la cual se actualizan y unifican las normas expedidas por la
Sala General de la Superintendencia de Valores y se integran por vía de
referencia otras No. 400, 1995. (in Spanish only)
http://www.minhacienda.gov.co/portal/page/portal/4190E358...
Bill adopting International Financial Reporting Standards for the
presentation of accounting reports No. 165, 2007 - Proyecto por el cual el
Estado colombiano adopta las normas internacionales de información
financiera para la presentación de informes contables No. 165, 2007 (in
Spanish only)
http://www.adecum.org/globalconta/proyectoadopcionifrs(16...
19

Supplementary Sources
Colombian Stock Exchange, "Aportes de la Ley del Mercado de Valores
[Contributions of the Securities Market Law]," Forum: The Securities
Market Reform, Contents and Implications, August, 2005. Available from
Colombian Superintendency of Finance website. Accessed on July 10,
2008. (BVC 2005)
http://www.superfinanciera.gov.co/seminarios/JUANCORDOBA%...
Council of Securities Regulators of the Americas website. Accessed on July
10, 2008. (COSRA website)
http://www.cvm.gov.br/ingl/inter/cosra/survei-e.asp
http://www.cvm.gov.br/ingl/inter/cosra/membro-e.asp
http://www.cvm.gov.br/ingl/inter/cosra/bylaw-e.asp
Del Valle, C., "Ley del Mercado de Valores [Securities Market Law]," Forum:
The Securities Market Reform, Contents and Implications, August, 2005.
Available from Colombian Superintendency of Finance website. Accessed
on July 10, 2008. (Del Valle 2005)
http://www.superfinanciera.gov.co/seminarios/forocdelvall...
Duque Tobón, L. I., "Ley del Mercado de Valores: Antecedentes y
Aplicaciones [Securities Market Law: Background and Applications]," n.d.
Available from EAFIT University website. Accessed on July 9, 2008. (Duque
Tobón n.d.)
http://www.eafit.edu.co/NR/rdonlyres/5EB56B95-7708-46AB-9...
Forigua Rojas, J., Ley de Mercado de Valores 964 de 2005: Régimen
Sancionatorio, Infracciones y Sanciones Administrativas [Securities Market
Law 964 of 2005: Sanctionary Regime, Administrative Infractions and
Sanctions]," Securities Market Law Seminar, July 2005. Available from
Colombian Superintendency of Finance website. Accessed on July 10,
2008. (Forigua Rojas 2005)
http://www.superfinanciera.gov.co/seminarios/regimensanci...
International Monetary Fund, "Colombia: 2007 Article IV Consultation -
Staff Report; and Public Information Notice on the Executive Board
Discussion," Country Report No. 08/31, Washington, D.C. : IMF, January
2008. Available from International Monetary Fund website. Accessed on
May 7, 2008. (IMF 2008)
http://www.imf.org/external/pubs/ft/scr/2008/cr0831.pdf
International Organization of Securities Commissions website. Accessed on
July 12, 2008 (IOSCO website)
http://www.iosco.org/lists/display_committees.cfm?cmtid=8
http://www.iosco.org/lists/display_committees.cfm?cmtid=9
http://www.iosco.org/lists/display_committees.cfm?cmtid=1
Jaramillo Ossa, J. H., "La Protección al Inversionista y a los Activos de los
Clientes en Colombia [Investor and Client's Assets Protection in
Colombia]," Seventh Annual Seminar of the Americas' Central Securities
Depositories Association, 2006. Available from Americas' Central
Securities Depositories Association website. Accessed on July 10, 2008.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
(Jaramillo Ossa 2006)
http://www.acsda.org/download/spanish/sem_2006/10_11_2006...
Ministry of Finance and Public Credit, "Minhacienda Radica Proyecto de
Reforma Financiera en el Congreso: Habrá un Régimen Integral para
Defender al Consumidor de los Servicios Financieros [The Ministry of
Finance and Public Credit Submits the Financial Reform Bill to Congress:
There Will Be an Integral Regime to Protect Consumer from Financial
Services," Bogotá: Ministry of Finance and Public Credit, April 2008.
Available from Colombian Superintendency of Finance website. Accessed
on July 10, 2008. (MHCP 2008)
http://www.superfinanciera.gov.co/NormativaFinanciera/com...
Rosillo Rojas, M., "La Autorregulación en la Ley del Mercado de Valores:
Diagnóstico, Perspectivas y Retos [Self-Regulation in the Securities Market
Law: Diagnosis, Perspectives and Challenges]," Securities Market Law
Seminar, July 2005. Available from Colombian Superintendency of Finance
website. Accessed on July 10, 2008. (Rossillo Rojas 2005)
http://www.superfinanciera.gov.co/seminarios/autorregulac...
Rosillo Rojas, M., "Regulación y Autorregulación: la Autorregulación en el
Mercado de Valores Colombiano [Regulation and Self-regulation: Self-
Regulation in the Colombian Securities Market]," Stocks Market
Development International Conference in Chile, Santiago, Chile, June 27,
2008. Available from Superintendencia de Valores y Seguros de Chile
website. Accessed on July 10, 2008. (Rosillo Rojas 2008)
http://www.svs.cl/sitio/publicaciones/doc/Present_Maurici...
Superintendency of Finance, "Informe de Gestión: Enero - Diciembre de
2007 [Management Report: January - December 2007]," March 2008
Available from Superintendency of Finance website. Accessed on June 20,
2008. (SF 2008)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
Superintendency of Finance, "Superintendencia Financiera de Colombia
[Colombian Superintendency of Finance]," n.d. Available from
Superintendency of Finance website. Accessed on June 20, 2008. (SF n.d.)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
Superintendency of Finance website. Last updated on June 12, 2008.
Accessed on July 10, 2008. (SF website)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
Unidad de Información y Análisis Financiero website. Last updated on May
6, 2008. Accessed on May 6, 2008. (UIAF website)
http://www.uiaf.gov.co/index.php?idcategoria=360&uiaf_uia...
http://www.uiaf.gov.co
U.S. Department of Commerce, "Doing Business in Colombia: A Country
Commercial Guide," 2008. Available from U.S. & Foreign Commercial
Service and U.S. Department of State website. Accessed on July 15, 2008.
(U.S. DoC 2008)
http://www.buyusainfo.net/docs/x_805569.pdf
20

Effective Insolvency and Creditor Rights Systems
LEVEL OF COMPLIANCE: INSUFFICIENT INFORMATION
Summary
According to the 2007 report by the Superintendency of
Companies and the Ministry of Commerce, Industry, and
Tourism, Law No. 1116 was passed in 2006 to establish a new
framework for corporate insolvency procedures in Colombia.
The new law introduced modifications to the previous
legislation, mainly to Law No. 550 of 1999, which overly
protected debtors and thereby negatively affected bank lending
and the Colombian financial market. The World Bank website
discloses that the reform legislation was expected to follow the
World Bank's Principles and Guidelines for Effective Insolvency
and Creditor Rights Systems issued in 2001, as well as the
UNCITRAL Model Law on Cross-Border Insolvency. However,
there is insufficient information publicly available as to the
compliance of the adopted law with the World Bank´s
Principles.
General Overview
The 2005 Financial System Stability Assessment (FSSA) by the
International Monetary Fund (IMF) and a 2006 article by A.
Rouillon both assert that, in 1999, the Colombian insolvency
framework was modified by the emergency passage of Law
No. 550. This law aimed to protect debtors and was
excessively tilted against creditors. This turned out to be
potentially detrimental to the growth of bank lending and
economic development. However, the FSSA noted that
Colombia intended to reform its insolvency legislation. In fact,
the World Bank's Insolvency Overview, available on the World
Bank website, stated that Colombia was taking into
consideration the World Bank principles of 2001 in the
elaboration of the alternative insolvency framework. The 2007
report by the Superintendency of Companies and the Ministry
of Commerce, Industry and Tourism (SS&MCIT), states that
a new corporate insolvency regime was established by Law
No. 1116 of 2006. This Law modified the previous legislation,
particularly Law No. 550 of 1999. According to Oxford
Analytica's 2007 report, the implementation of the new Law
has led to a significant change in the legislation affecting
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
creditors' rights. Nevertheless, there is insufficient information
publicly available as to the compliance of the adopted law with
the World Bank´s Principles
The SS&MCIT report asserted that the new law, which was
implemented in June 2007, brought about several changes. It
established that debtors must elaborate a company recovery
plan and made compulsory the payment of taxes and pension
liabilities in order to initiate the liquidation process. It also
reduced the privileged status of fiscal liabilities. It introduced
balance between creditor and debtor rights. In addition, it
made permanent some provisions contained in the Law No.
550 and it made liquidation processes more dynamic. The IMF
report observed that, prior to the implementation of Law
No. 1116, there were two main weaknesses concerning the
insolvency system. First, there were inadequate requirements
for implementing a restructuring agreement and, second, there
were delays in insolvency procedures.
The World Bank website notes that creditor rights and the
collateral system are regulated by the Colombian Civil Code
and the Commercial Code. The IMF report asserts that, before
the passage of Law No. 1116, Colombian legislation adequately
established creditor rights but still displayed shortcomings in
its enforcement proceedings. The report notes the need for
centralized land and movable-property registries and observes
that individual suits had inappropriate procedures at their
disposal for collecting funds for secured and unsecured
creditors. Moreover, Rouillon's 2006 report states that secured
creditors considered the collateral mechanisms provided by
Colombian legislation insufficient, asserting that default risks
were not reduced by those instruments. According to the
Brigard and Urrutia 2006 report, Law No. 222 of 1995 also
sets out provisions on liquidations and restructuring
procedures, and the 1993 Financial System Organic Statute
Decree No. 663 provides for liquidations and the takeover of
insolvent firms by the financial entities supervisor. The World
Bank website discloses that Decree No. 1080 of 1996, the Civil
Procedure Code, and the Civil Code also establish provisions
21

related to liquidations. The U.S. Department of Commerce's
(DoC) 2008 report states that Law No. 145 of 1999 provides
the Colombian government with the authority to intervene in
all companies permanently located in Colombia. The report
notes that "this law promotes solutions along the lines of
U.S.-style 'Chapter 11' bailouts for companies with financial
problems which face possible liquidation or bankruptcy" (p.
92). The report adds that the legislation provides for stringent
procedures concerning restructuring agreements. For example,
companies that are being restructured cannot freely perform
financial operations unrelated to the company's activity.
An undated article appearing on the MCIT website states that
the Superintendency of Companies arranges the bankruptcy
processes for all legal persons, whereas specialized civil judges
arrange processes for individuals. According to this article,
the Superintendency seeks to contribute to community
developments through the correct interpretation and
implementation of the legal regime and to implement adequate
resolution processes. It seeks to perform its tasks effectively
in order to avoid crisis situations and to monitor restructuring
and bankruptcy processes. Prior to legislative reforms, the IMF
had reported that enhancing public confidence in insolvency
resolution procedures would improve the Superintendency's
ability to fulfill its role. Touillon, however, observe that the
Colombian institutional framework is not aligned with
international standards because the Superintendency of
Companies is not as independent as the Judiciary.
The International Bank for Reconstruction and Development
and the World Bank have published a "Doing Business" report
for Colombia in 2009, in which it dealt with Colombia's
practices on a number of dimensions, including closing a
business. The results of this review are summarized on the
World Bank's "Doing Business 2009" Colombia webpage.
According to the report, business-closing practices can be
evaluated by looking at three principle elements: the time
(in years) it takes to complete the process, the cost (as a
percentage of the debtor estate) of the procedure, and the
recovery rate enjoyed by creditors, expressed in terms of
cents on the dollar. The report presents these data alongside
comparable averages achieved both within the region and
across the membership of the Organization for Economic Co-
operation and Development (OECD). According to the
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
report, it takes an average of 3 years to complete a business
closing in Colombia, compared with a regional average of 3.3
years and an OECD member state average of 1.7 years. In
Colombia it costs 1.0% of the estate to close a business,
compared to 15.9% for the region and 8.4% for OECD states.
Finally, creditors recover an average of 52.8 cents on the dollar
in Colombia, whereas the regional average is 26.8 cents and
the OECD average is 68.6.
Sources of Assessment
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on July 23, 2008. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
World Bank website. Accessed on July 23, 2008. (WB website)
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/LAWANDJUS...
Relevant Organizations
Colombian Juridical Branch - Rama Jurídica de Colombia (website in
Spanish only)
http://www.ramajudicial.gov.co/csj_portal/index.html
Ministry of Commerce, Industry and Tourism - Ministerio de Comercio,
Industria y Turismo (MCIT) (website in Spanish only)
http://www.mincomercio.gov.co/eContent/home.asp
Superintendency of Companies - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?
Relevant Legislation/Regulation
Commercial Code Decree No. 410, 1971 - Código de Comercio Decreto
No. 410, 1971 (in Spanish only)
http://alcaldiademonteria.tripod.com/codigos/comercio/cod...
Colombian Civil Code - Código Civil Colombiano (in Spanish only)
http://encolombia.com/derecho/C%C3%B3digoCivilColombiano/...
Civil Procedure Code Decrees No. 1400 and No. 2019, 1970 - Código de
Procedimiento Civil Decretos No. 1400 y No. 2019, 1970 (in Spanish only)
http://alcaldiademonteria.tripod.com/codigos/civil/tblcnd...
Law modifying the Commerce Code Book II, issuing a new regime of
bankruptcy processes, and other dispositions No. 222, 1995 - Ley por la
cual se modifica el Libro II del Código de Comercio, se expide un nuevo
régimen de procesos concursales y se dictan otras disposiciones No. 222,
1995 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law establishing the Corporate Insolvency Regime in the Republic of
Colombia and other dispositions are issued No. 1116, 2006 - Ley por la
cual se establece el Régimen de Insolvencia Empresarial en la República de
22

Colombia y se dictan otras disposiciones No. 1116, 2006 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law creating a regime to promote and facilitate corporate recovery to
ensure corporate responsibility and issuing norms to harmonize the
current legal framework with the requirements of this Law No. 550, 1999 -
Ley por la cual se establece un régimen que promueva y facilite la
reactivación empresarial y la reestructuración de los entes territoriales para
asegurar la función social de las empresas y lograr el desarrollo armónico
de las regiones y se dictan disposiciones para armonizar el régimen legal
vigente con las normas de esta ley No. 550, 1999 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law No. 145, 1999 - Ley No. 145, 1999
Financial System Organic Statute Decree No. 663, 1993 - Estatuto
Orgánico del Sistema Financiero No. 663, 1993 (in Spanish only)
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Decree reforming the Superintendency of Companies and issuing norms
on its administration and resources No. 1080, 1996 - Decreto por el cual
se reestructura la Superintendencia de Sociedades y se dictan normas
sobre su administración y recursos No. 1080, 1996 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Supplementary Sources
Brigard & Urrutia Abogados S.A., "Guide to Doing Business in Colombia,"
Bogotá, Colombia: Brigard & Urrutia, September 2006. Available from
Leximundi website. Accessed on July 22, 2008. (Brigard & Urrutia 2006)
http://www.lexmundi.com/images/lexmundi/PDF/guide_colombi...
International Bank for Reconstruction and Development and the World
Bank, "Doing Business 2009: Country Profile for Colombia," 2009. Available
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
from Doing Business website. Accessed on January 5, 2009. (IBRD&WB
2009)
http://www.doingbusiness.org/exploreeconomies/?economyid=46
http://www.doingbusiness.org/Documents/CountryProfiles/CO...
Ministry of Commerce, Industry and Tourism, "Superintendencia de
Sociedades [Superintendency of Companies]," n.d. Available from World
Bank website. Accessed on July 23, 2008. (MCIT n.d.)
http://siteresources.worldbank.org/GILDCOLOMBIA/Library/2...
Oxford Analytica, "Shareholder And Creditor Rights In Key Emerging
Markets 2006," Oxford Analytica, January 2007. Available from California
Public Employee Retirement System website. Accessed on July 22, 2008.
(OA 2007)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
Rouillon, A., "Colombia: Derechos de Crédito y Procesos Concursales
[Colombia: Credit Rights and Bankruptcy Processes]," May 2006. Available
from Ministry of Finance and Public Credit website. Accessed on July 23,
2008. (Rouillon 2006)
http://www.minhacienda.gov.co/portal/page/portal/MinHacie...
Superintendency of Companies and Ministry of Commerce, Industry and
Tourism, "Cartilla: Nuevo Régimen de Insolvencia Empresarial, Ley 1116 de
2006 [Chart: New Corporate Insolvency Regime, Law 1116 of 2006],"
2007. Available from Legislación y Jurisprudencia website. Accessed on July
23, 2008. (SS&MCIT 2007)
http://www.legislacionyjurisprudencia.com/temas/2007/Cart...
U.S. Department of Commerce, "Doing Business In Colombia: A Country
Commercial Guide for U.S. Companies", U.S. & Foreign Commercial
Service and U.S. Department Of State, March 2008. Available from U.S.
Department of Commerce website. Accessed on July 23, 2008. (U.S. DoC
2008)
http://www.buyusainfo.net/docs/x_3734345.pdf
23

Insurance Core Principles
LEVEL OF COMPLIANCE: INSUFFICIENT INFORMATION
Summary
The Financial System Stability Assessment update conducted
by the International Monetary Fund (IMF) in 2005 asserts that
the regulatory capabilities of the supervisor have improved,
as reflected by the enhanced technical skills of staff, and the
adoption of modern procedures consistent with international
best practices. However, the political independence of the
supervisor, solvency margins rules, international cooperation,
and the scheme for taking preventive measures are key areas
where further advances are needed. Consequently, the IMF
assessment recommended that Colombia improve supervisory
practices and market infrastructure, and reinforce the
regulation of the non-life sector concerning provisioning and
risk-oriented solvency. Further, the IMF suggested that
Colombia strengthen the independence of the supervisor and
assign more resources to insurance supervision. In August
2007, the Federation of Colombian Insurers released a
Corporate Governance Code for the insurance industry in
order to promote best corporate governance practices of
insurers. Nevertheless, there is insufficient information publicly
available as to Colombia's compliance with the Insurance Core
Principles promulgated by the International Association of
Insurance Supervisors in 2003.
General Overview
Prior to 2005, the year in which Colombia modified its
supervisory framework, the insurance sector was supervised
by the Superintendency of Banks (SB). During this period,
the International Monetary Fund (IMF) published a Financial
System Stability Assessment (FSSA) Update which asserted
that progress had been made in the regulation of the
Colombian insurance sector. The IMF cited improvements in
the regulator's technical skills and the adoption of modern
procedures in line with international best practices as two key
areas in which progress had been made. However, a significant
reduction in staffing raised concerns regarding SB's ability to
carry out proper regulation. The IMF report stated that there
had been significant advances in the area of internal risk-based
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
financial assessment methods, and steady progress was being
made towards a solvency-monitoring approach. However, the
report noted that "some data collection initiatives in the nonlife
sector are needed to take the analysis further along with
targeted assistance on technical issues" (p. 18). The report
recommended different measures to cope with the identified
shortcomings. It suggested that Colombia strengthen its
supervisory practices and reinforce the provisioning and risk-
oriented solvency regulation of the nonlife sector. The
independence of the supervisor should be improved and there
should be more resources assigned to supervise the insurance
sector. In 2005, the SB and the Superintendency of Securities
were merged to form the Superintendency of Finance (SF) in
accordance with Decree No. 4327 of 2005. Since this occurred
after the IMF's Update, there in insufficient information as
to Colombia's current compliance with the Insurance Core
Principles promulgated by the International Association of
Insurance Supervisors (IAIS) in 2003.
The SF website discloses that the insurance sector in Colombia
is governed by the following laws and regulations: (1) Financial
System Organic Statute Decree No. 663 of 1993 (EOSF)
sets rules regarding the supervisor and supervised entities,
inspections, sanctions, and procedures; (2) Commerce Code
through Decree No. 410 of 1971, which regulates insurance
contracts; (3) SB External Communication No. 7 of 1996,
which regulates operational aspects; and (4) SB External
Communication No. 100 of 1995 on accounting and valuation
issues. The 2008 report by the Ministry of Finance and Public
Credit (MHCP) states that the Colombian government has
sent a Bill to Congress that seeks to protect financial
customers, However, the 2007 report by Fedesarrollo and the
Center for International Private Enterprise (CIPE) points out
that although the reform bill would introduce some changes to
the structure and supervisory function of the financial system,
there are some important issues that are not included, such
as creditors rights, financial information, and the execution and
constitution of guarantees.
24
 Financial Standards Report Colombia
January 2009

A brochure available on the SF website discloses that the SF is Principle: ICP 2 Supervisory
in charge of regulating and supervising insurance activities and objectives
protecting policy-holders. Decree No. 2739 of 1991, the EOSF,
[Insufficient Information]
Law No. 964 of 2005, and modifying regulations confer on the
SF those functions previously assigned to the Superintendency
According to Article No. 46 of the EOSF, the supervisory
of Securities (SV) and the SB. The SF is a technical body
objectives are to guarantee that financial activities benefit the
under the MHCP. The 2007 report by Acosta asserts that
society; to protect people that have savings, depositors, policy-
two of the main challenges facing the SF are to design a
holders, and investors; to promote free competition; to
stronger governance structure and to increase its financial and
democratize credit; and to protect and foster financial
political independence. The SF reports that, as of 2008, 24
institutions development. Nonetheless, there is insufficient
general insurance companies, 20 life insurance companies, and
information publicly available as to Colombia's compliance with
5 capitalization companies operated in the Colombian
this principle.
insurance market. The insurance sector has showed asignificant
increase of assets under management since 1999. Acosta notes
that, as of 2007, the portfolio composition of the insurance
Principle: ICP 3 Supervisory
sector was: (1) 47 percent of sovereign debt; (2) 32 percent of authority
other debts; and (3) 21 percent of equities. As noted on the [Insufficient Information]
IAIS website, Colombia is a member of the IAIS.
The SF was created by Decree No. 4327 of 2005 with the
Principle: ICP 1 Conditions for merger of the SB and the SV. Prior to this merger, the
insurance sector was supervised by the SB. The 2005 IMF
effective insurance supervision FSSA Update noted that, under this earlier system, there had
[Insufficient Information] been progress in the regulation of Colombia's insurance sector,
particularly in the area of improved technical skills and the
A brochure available on the SF website discloses that the SF
adoption of modern procedures that approached international
is in charge of supervising the Colombian financial system,
best practice. The SF website discloses that the
including the insurance sector. The objective of the SF is to
Superintendency's functions include the supervision of
preserve stability, promote the development of the securities
insurance activities and the protection of policy holders.
market, and protect investors and policy holders. The SF
Decree No. 2739, the EOSF, and Law No. 964, as well as
acknowledges that financial supervision is key to promoting
other modifying regulations, invest the SF with the functions
Colombian economic and social development. The EOSF
of its predecessor agencies. The SF is a technical body under
specifies the main functions of the SF and includes provisions
the MHCP. Furthermore, the SF is also controlled by entities
regarding insurance companies, credit institutions, financial
such as the General Comptroller and the General Prosecutor's
services companies, capitalization companies, and insurance
Office. Per the 2007 Acosta report, two of the main challenges
and reinsurance brokers. Concerning accounting standards, the
facing the SF are to design a stronger governance structure and
2005 IMF report notes that there are serious departures from
to increase its financial and political independence. However,
international accounting principles, and the interpretation of
there is insufficient information publicly available as to
the Colombian accounting requirements is troublesome.
Colombia's compliance with this principle.
However, the Dinero Magazine website discloses that
Congress is considering Bill No. 165 of 2007, which would
adopt International Financial Reporting Standards (IFRSs) as
Principle: ICP 4 Supervisory process
mandatory standards to be applied in large companies by 2010. [Insufficient Information]
For small and medium-size companies, the deadline is 2012.
Before the creation of the SF through the merger of the SB
However, there is insufficient information publicly available as
and SV, the SB published a 2005 report entitled "Inspection
to Colombia's compliance with this principle.

www.estandardsforum.org 25

Methodology Document." This report explained in detail the
SB supervisory process, which comprised five steps: (1) annual
planning establishing the entities to be inspected; (2) individual
inspection planning performed three weeks before the
inspection which aims to analyze off-site information; (3)
solicitation of information; (4) inspection development; and
(5) elaboration of the inspection report. Nonetheless, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: ICP 5 Supervisory
cooperation and information sharing
[Insufficient Information]
Article 92 of Law No. 795 of 2003, which modifies some
provisions of the EOSF, creates a Coordination Committee for
financial sector supervision. This was composed by the MHCP,
the SB, and the SV (now the MHCP and the SF), the Central
Bank of Colombia, and the Financial Institutions Guarantee
Fund. The Committee facilitates information sharing, promotes
the homogeneity of the procedures employed, and coordinates
actions. However, as noted in the 2005 IMF report, it was
necessary to establish a better mechanism for coordination
of efforts and information sharing among various agencies.
However, there is insufficient information publicly available as
to Colombia's compliance with this principle.
Principle: ICP 6 Licensing
[Insufficient Information]
As indicated on the SF's website, the Colombian National
Constitution defines insurance activity as being an issue of
the public interest. Such activity can only be executed with
prior authorization by the State. The requisites and procedures
that institutions must comply with in order to obtain the
supervisor's authorization are set out in Articles 39 and 108
of the EOSF and External Communication No. 7 of 1996.
According to the EOSF, the entities must send to the
supervisor a formal solicitation that includes: (1) proposed by-
laws; (2) the amount and form of capital to be raised (this must
exceed the minimum required); (3) information on participants
in such activities; (4) a feasibility plan: and (5) any additional
information requested by the supervisor.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
According to the SF website, the minimum capital entrance
requirement for insurance companies is 5.5 billion pesos. This
requirement reaches 22 billions pesos for reinsurance
companies, These amounts are adjusted annually, according
to Law No. 795 of 2003. An additional minimum capital
requirement applies that is established by the government
and varies depending on the type of insurance activity. With
regard to foreign insurers, Article 188 of the EOSF states that
insurance on ships, cars, and planes registered in Colombia
must be provided by companies that are legally established in
Colombia or by foreign companies with previous authorization
from the supervisor. Nonetheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: ICP 7 Suitability of persons
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 8 Changes in control
and portfolio transfers
[Insufficient Information]
Article 326 of the EOSF states that the supervisor can reject
or accept the merger or acquisition of any insurance company.
As noted on the SF website, insurance companies are able to
transfer insurance contracts totally or partially to other entities
that offer a corresponding type of insurance. SF authorization
is required when the transfer is larger than the 25 percent of
the portfolio of the branch. Insured people must be informed
in advance of such transfers, and their rights and guarantees
cannot be modified. However, there is insufficient information
publicly available as to Colombia's compliance with this
principle.
Principle: ICP 9 Corporate
governance
[Insufficient Information]
In August 2007 the Federation of Colombian Insurers released
a Corporate Governance Code for the insurance industry.
26

The Code provides a framework to be used by the insurance
companies to elaborate their own codes following international
standards, according to the Federation website. As of May
2008, 60 percent of insurance companies have implemented
their own codes, according to the Goseguros website.
Nonetheless, there is insufficient information publicly available
as to Colombia's compliance with this principle.
Principle: ICP 10 Internal control
[Insufficient Information]
According to the SF website, Colombian Commerce Code,
through Decree No. 410 of 1971, establishes that all issuers
must have an external auditor ("revisor fiscal"), in charge of
evaluating the adequacy of the companies' internal controls.
As stated in the Correa Bonillas's 2001 report, External
Communication No. 7 of 1996 establishes the rules on internal
controls that supervised entities must follow. Furthermore,
the Communication states that entities should establish an
audit committee. The 2008 SF "Management Report: January-
December 2007" asserts that the SF verifies the adequacy of
companies' internal controls and oversees the implementation
of measures and procedures. However, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: ICP 11 Market analysis
[Insufficient Information]
The SF website discloses aggregate and detailed data on the
insurance market in general, as well as information on individual
entities. The SF issues press releases with data on (1) the
industry's general balance sheet, liabilities and assets; (2) the
industry's financial statements; (3) the evolution of each
insurance business line; and (4) the financial situation of each
company. However, there is insufficient information publicly
available as to Colombia's compliance with this principle.
Principle: ICP 12 Reporting to
supervisors and off-site monitoring
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
The SF website discloses aggregate and detailed data on the
insurance market in general, as well as information on individual
entities. The SF issues press releases with data on (1) the
industry's general balance sheet, liabilities and assets; (2) the
industry's financial statements; (3) the evolution of each
insurance business line; and (4) the financial situation of each
company. However, there is insufficient information publicly
available as to Colombia's compliance with this principle.
Principle: ICP 13 On-site inspection
[Insufficient Information]
As established by the EOSF and the Commerce Code of
Colombia, as soon as an insurance company is granted a license
to do business in the country, the regulatory authorities start
monitoring the company's corporate affairs. According to the
2008 SF "Management Report: January-December 2007," the
SF's on-site inspections are the main verification mechanism
of the supervised entities' procedures and compliance with
regulations. Moreover, Article 326 of the EOSF establishes
that the supervisor can carry out inspections to oversee the
entities' financial situation, its business management, and special
issues. Nevertheless, there is insufficient information publicly
available as to Colombia's compliance with this principle.
Principle: ICP 14 Preventive and
corrective measures
[Insufficient Information]
Article 113 of the EOSF sets forth the different supervisory
measures that the SF can take to prevent entities from taking
possession of its goods, assets, or businesses. Prior to the
integration of the SB and the SV into the SF, according to the
2005 SB "Conceptual and Supervisory Policy Document," the
supervisor had powers to issue recommendations, and take
preventive and corrective actions to overcome deficiencies.
However, no information on the compliance of the new
regime with this principle is publicly available.
Principle: ICP 15 Enforcement or
sanctions
[Insufficient Information]
27

The 2005 SB report titled "Conceptual and Supervisory Policy
Document" notes that Colombian legislation (in particular
Article 114 of the EOSF) establishes that the supervisor may
impose sanctions when companies do not comply with the
supervisor's dispositions and when submitted accounting
information is inconsistent. The SF's 2008 Management Report
notes that, during 2007, the SF issued 35 reprimands and
imposed 145 fines. Nevertheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: ICP 16 Winding-up & exit
from the market
[Insufficient Information]
The EOSF establishes that the supervisor can take possession
of the supervised entity in order to determine whether to wind
it up or look for alternative solutions that would allow the
company to continue operating. However, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: ICP 17 Group-wide
supervision
[Insufficient Information]
According to the 2008 SF Management Report, Article 325
of the EOSF sets out that supervision must be performed
on a comprehensive and consolidated basis. The SB's 2005
"Conceptual and Supervisory Policy Document" notes that
supervision shall take into account the increasing globalization
of financial transactions. The presence of foreign companies
in Colombia and the establishment of Colombian companies'
branches abroad call for a supervisory process with an
international dimension. Nevertheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: ICP 18 Risk assessment
and management
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
The 2005 IMF report states that significant progress had been
made with relation to internal risk-based financial assessment
methods. Also, Colombia had made steady advances towards a
solvency-monitoring approach. However, "some data collection
initiatives in the nonlife sector are needed to take the analysis
further along with targeted assistance on technical issues" (p.
18). According to the 2008 SF Management Report, the SF has
been gradually implementing risk-based supervision, following
recommendations of other supervisors and international
organizations such as the International Organization of
Securities Commission, the Basel Committee, and the
Committee of Sponsoring Organizations of the Treadway
Commission. Furthermore, the report notes that every entity
is supervised taking into account its risk profile. However, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: ICP 19 Insurance activity
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 20 Liabilities
[Insufficient Information]
As indicated on the SF's website, insurance and reinsurance
companies established in Colombia must build appropriate
reserves to cover casualty payments. The following reserves
are considered: (1) reserves for unearned premiums; (2)
reserves for reported claims; (3) reserves for unreported
claims; (4) a mathematical reserve, that is the difference
between the actual value of the future risk of the insurance
company and the actual value of net premiums that are paid by
the insured; and (5) reserves from deviation of casualties when
dealing with catastrophes. Technical reserves must be invested
in a portfolio that is regulated by Decrees No. 94 of 2000 and
No. 2779 of 2001. Decree No. 94 sets out that reserves shall
follow a conservative investment strategy. Nevertheless, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
28

Principle: ICP 21 Investments
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 22 Derivatives and
similar commitments
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 23 Capital adequacy
and solvency
[Insufficient Information]
As indicated on the SF's website, once in operation, insurance
and reinsurance companies must comply with minimum capital
requirements. The minimum capital requirement for insurance
companies is 5.5 billion pesos. This requirement reaches 22
billion pesos for reinsurance companies. These amounts are
annually adjusted in line with Law No. 795. Also, there is an
additional minimum net worth requirement that is established
by the government and varies depending on the insurance
business line. The EOSF requires insurance companies to hold
a solvency margin determined by the government. This margin
is calculated as a function of the largest of the total amount of
premiums collected or the mean of claims paid in the last three
financial years. Nonetheless, there is insufficient information
publicly available as to Colombia's compliance with this
principle.
Principle: ICP 24 Intermediaries
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 25 Consumer
protection
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
According to the SF website, the SF's mission is to preserve
public confidence and financial system stability, to make stock
markets transparent and efficient; and to protect consumers of
financial services. In order to achieve this objective, according
to MHCP Press Communication No. 28 of April, 2008, the
government sent to the Congress a Financial Reform Bill that
would provide a comprehensive consumer protection scheme.
The document notes that the Bill contains a chapter which
details consumer rights, insurer obligations, and possible
sanctions. The proposed bill strengthens the role of "Client
Defender" and sets out that the information provided to the
consumer must be timely, transparent, truthful, and
appropriate. Nonetheless, there is insufficient information
publicly available as to Colombia's compliance with this
principle.
Principle: ICP 26 Information,
disclosure & transparency towards
the market
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 27 Fraud
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: ICP 28 Anti-money
laundering/ Combating the Financing
of Terrorism
[Insufficient Information]
The 2008 report by the Bureau of International Narcotics
and Law Enforcement Affairs states that Colombia formally
adopted legislation in 1999 to establish the Financial
Information and Analysis Unit (UIAF) within the MHCO. The
UIAF enjoys ample powers to access and analyze financial
information of public and private entities in Colombia.
Supervised entities are required to report suspicious
29

transactions to the UIAF, but not to the implicated clients. In
addition, most entities under the supervision of the UIAF must
establish "know-your-customer" provisions. Nevertheless, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
Sources of Assessment
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, Including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287 Revised, Washington, D.C.: IMF, August 2005. Available from
International Monetary Fund website. Accessed on May 23, 2008. (IMF
2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
Relevant Organizations
Central Bank of Colombia - Banco de la República de Colombia (CBC)
http://www.banrep.gov.co/index_eng.html
Federation of Colombian Insurers - Federación de Aseguradores
Colombianos (FASECOLDA) (website in Spanish only)
http://www.fasecolda.com/fasecolda/
Financial Institutions Guarantee Fund - Fondo de Garantías de Instituciones
Financieras (FOGAFIN) (website in Spanish only)
https://www.fogafin.gov.co/Principales/principal.html
General Prosecutor's Office - Fiscalía General de la Nación (FGN)
(website in Spanish only)
http://www.fiscalia.gov.co/
Ministry of Finance and Public Credit - Ministerio Hacienda y Credit
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/
Office of the General Comptroller - Contraloría General de la República
de Colombia (CGR) (website in Spanish only)
http://www.contraloriagen.gov.co/html/home/home.asp
Superintendency of Companies - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?MIval=s...
Superintendency of Finance - Superintendencia Financiera (SF)
http://www.superfinanciera.gov.co/
Relevant Legislation/Regulation
Colombian Constitution, 1991 - Constitución Política de Colombia, 1991
(in Spanish only)
http://www.ideaspaz.org/proyecto03/boletines/download/bol...
Financial System Organic Statute, Decree No. 663, 1993 - Estatuto
Orgánico del Sistema Financiero, Decreto No. 663, 1993 (in Spanish only)
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Law creating the Financial Information and Analysis Unit No. 526, 1999 -
Ley por la cual se crea la Unidad de Información y Análisis Financiero No.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
526, 1999 (in Spanish only)
http://www.secretariasenado.gov.co/leyes/L0526_99.HTM
Law issuing General Norms, Objectives and Criteria that the National
Government Must Consider when Regulating Activities Related to the
Management, Use, and Investment of Resources Collected from the Public
through Securities, and Other Norms Are Enacted No. 964, 2005 - Ley
por la cual se dictan normas generales y se señalan en ellas los objetivos y
criterios a los cuales debe sujetarse el Gobierno Nacional para regular las
actividades de manejo, aprovechamiento e inversión de recursos captados
del público que se efectúen mediante valores y se dictan otras
disposiciones No. 964, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law adjusting Some Norms of the Financial Sector Organic Statute and
Other Dispositions Are Enacted No. 795, 2003 - Ley por la cual se ajustan
algunas normas del Estatuto Orgánico del Sistema Financiero y se dictan
otras disposiciones No. 795, 2003 (in Spanish only)
http://www.superfinanciera.gov.co/Normativa/leyreformafin...
Commerce Code, Decree No. 410, 1971 - Código de Comercio, Decreto
No. 410, 1971 (in Spanish only)
http://encolombia.com/derecho/CodigoComercioColombiano/Co...
Decree merging the Colombian Superintendency of Banks with the
Superintendency of Securities and Its Structure Is Modified No. 4327, 2005
- Decreto por el cual se fusiona la Superintendencia Bancaria de Colombia
en la Superintendencia de Valores y se modifica su estructura No. 4327,
2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Decree by which the Structure of the National Securities Commission Is
Adapted to Its New Nature as Superintendency No. 2739, 1991 - Decreto
por el cual se adecua la estructura de la Comisión Nacional de Valores a su
nueva naturaleza de superintendencia (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Decree Establishing the Investment Regime for Insurance Companies and
Capitalization Companies No. 94, 2000 - Decreto por el cual se establece
el régimen de inversiones de entidades aseguradoras y sociedades de
capitalización No. 94, 2000 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Decree Regulating Decree No. 94 of 2000, No. 2779, 2001 - Decreto por
el cual se reglamenta el decreto 94 de 2000, No. 2779, 2001 (in Spanish
only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
External Communication of the Superintendency of Banks No. 7, 1996 -
Circular Externa de la Superintendencia Bancaria No. 7, 1996 (in Spanish
only)
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
External Communication of the Superintendency of Banks No. 100, 1995 -
Circular Externa de la Superintendencia Bancaria No. 100, 1995 (in Spanish
only)
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Corporate Governance Code of the Federation of Colombian Insurers,
2007 - Código de Gobierno Corporativo de la Federación de
Aseguradores Colombianos, 2007 (in Spanish only)
http://www.fasecolda.com/fasecolda/BancoConocimiento/S/so...
Draft Law by which the Colombian State Adopts International Financial
Reporting Standards for the Accounting Reporting No. 165, 2007 -
Proyecto por el cual el Estado colombiano adopta las Normas
30

Internacionales de Información Financiera para la presentación de informes
contables No. 165, 2007 (in Spanish only)
http://www.adecum.org/globalconta/proyectoadopcionifrs(16...
Supplementary Sources
Acosta, A., "Colombia Summary," Presentation at the World Bank and
International Monetary Fund Conference on Aligning Financial Supervisory
Structure with Country Needs, Washington, D.C., June 5-6, 2006. Available
from World Bank website. Accessed on November 17, 2008. (Acosta
2006)
http://info.worldbank.org/etools/library/view_p.asp?lprog...
Acosta, A., "El Sector Asegurador y la Superintendencia Financiera [The
Insurance Sector and the Superintendency of Finance]," Presentation at the
XVI International Insurance Conference, Cartagena, May 2007. Available
from Superintendency of Finance website. Accessed on June 20, 2008.
(Acosta 2007)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
Correa Bonilla, P., "Política de Supervisión y Control [Supervision and
Control Policy]," Speech at the Insurance Companies Convention, Boyacá,
Colombia, November 17, 2001. Available from Superintendency of Finance
website. Accessed on June 20, 2008. (Correa Bonilla 2001)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
Dinero Magazine website, "Hacia una Contabilidad Global [Toward Global
Accounting]," March 28, 2008. Available from Dinero Magazine website.
Accessed on June 5, 2008. (Dinero Magazine website)
http://www.dinero.com/wf_InfoArticulo.aspx?IdArt=46084
Fedesarrollo and Center for International Private Enterprise, "El Proyecto
de Reforma Financiera [The Financial Reform Project]," Economics and
Politics: Analysis of Current Legislative Situation Analysis, No. 25,
November 2007, Accessed on November 17, 2008. (Fedesarrollo&CIPE
2007)
http://www.cipe.org/regional/lac/pdf/Fedesarollo35.pdf
Superintendency of Finance, "Informe de Gestión: Enero-Diciembre 2007
[Management Report: January-December 2007]," March 2008. Available
from Superintendency of Finance website. Accessed on June 20, 2008. (SF
2008a)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
Superintendency of Finance, "Comportamiento del Sector Asegurador
enero - marzo de 2008 [Insurance Sector Performance January - March
2008]," March 2008. Available from Superintendency of Finance website.
Accessed on June 20, 2008. (SF 2008b)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Superintendency of Finance, "Superintendencia Financiera de Colombia
[Colombian Superintendency of Finance]," n.d. Available from
Superintendency of Finance website. Accessed on June 20, 2008. (SF n.d.)
(in Spanish only)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
Superintendency of Finance website. Last updated on June 12, 2008.
Accessed on June 19, 2008. (SF website)
http://www.superfinanciera.gov.co/NuestraSuperintendencia...
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
http://www.superfinanciera.gov.co/Cifras/informacion/trim...
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Goseguros website. Last updated on May 29, 2008. Accessed on June 19,
2008. (Goseguros website) (in Spanish only)
http://www.goseguros.com/noticias/noti_hoy.asp?N=4842
Federation of Colombian Insurers website. Accessed on June 19, 2008.
(Fasecolda website) (in Spanish only)
http://www.fasecolda.com/fasecolda/BancoConocimiento/S/so...
International Association of Insurance Supervisors website. Accessed on
June 24, 2008. (IAIS website)
http://www.iaisweb.org/index.cfm?pageID=31
Ministry of Finance and Public Credit, "Minhacienda radica proyecto de
Reforma Financiera en el Congreso: habrá un régimen integral para
defender al consumidor de los servicios financieros [The Ministry of
Finance submits the Financial Reform Bill to the Congress: there will be an
integral regime to defend the consumer from financial services]," April
2008. Available from Superintendency of Finance website. Accessed on
June 20, 2008. (MHCP 2008) (in Spanish only)
http://www.superfinanciera.gov.co/NormativaFinanciera/com...
Presidency of Colombia website. Accessed on May 23, 2008 (Presidency
website) (in Spanish only)
http://www.presidencia.gov.co/sne/2005/noviembre/28/04282...
http://www.presidencia.gov.co/sne/2005/junio/23/04232005.htm
Superintendency of Banks, "Documento Conceptual y de Política de
Supervisión [Conceptual and Supervisory Policy Document]," June 2005.
Available from Superintendency of Finance website. Accessed on June 20,
2008. (SB 2005a)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
Superintendency of Banks, "Documento de Metodología de Inspección
[Inspection Methodology Document]," November 2005. Available from
Superintendency of Finance website. Accessed on June 20, 2008. (SB
2005b)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
31
 Financial Standards Report Colombia
January 2009

Anti-Money Laundering/Combating Terrorist Financing Standard

LEVEL OF COMPLIANCE: INTENT DECLARED

Summary were published in the 2004 GAFISUD mutual evaluation

report. In this document GAFISUD found that Colombia is
In October 2004, the Financial Action Task Force of South
"non-compliant" with three recommendations and six special
America (GAFISUD) conducted a mutual evaluation of
recommendations. It is "partially compliant" with ten
Colombia to assess the country's compliance with the Financial
recommendations and one special recommendation and it is
Action Task Force's (FATF) 40+8 recommendations and special
"largely compliant" with fifteen recommendations and
recommendations on anti-money laundering and combating
"compliant" with twelve recommendations and one special
the financing of terrorism. The results were released in a
recommendation. The report also stated that Colombia
2004 report, in which GAFISUD stated that Colombia is "non-
acknowledges the importance of combating money laundering
compliant" with three recommendations and six special
and terrorist financing. However, the GAFISUD evaluation also
recommendations (SR). The report also found Colombia to
identified some shortcomings. The 2004 report noted that
be "partially compliant" with ten recommendations and one
Colombia did not have efficient procedures for confiscating
special recommendation, "largely compliant" with fifteen
terrorists' money and assets, and financial institutions are not
recommendations and "compliant" with twelve
required to report suspicious transactions related to terrorism
recommendations and one special recommendation. However,
financing. Moreover, terrorist financing was not treated as a
the GAFISUD report identified several shortcomings and areas
separate crime.
in which improvements were needed. Most significantly, the
report noted that Colombia was non compliant with the
A 2007 report by Aranguren mentioned that the
special recommendations relating to terrorist financing. The
implementation of Law No. 1121 of 2006 ruled terrorism as
country did not comply with the FATF's requirements on
a separate offence. Further, Aranguren stated that Colombia
the criminalization of the financing of terrorism. Procedures
has broadened its anti-money laundering and combating the
to freeze terrorists' assets were not efficient and financial
financing of terrorism (AML/CFT) reporting requirements to
institutions were not required to report suspicious transactions
other sectors, such as lotteries, bingo games, betting parlors,
relating to terrorism. However, according to several reports,
and notaries. The International Monetary Fund's (IMF) 2005
subsequent to the 2004 GAFISUD report, Law No. 1121 of
Financial System Stability Assessment (FSSA) also reported
2006 amended the criminal code to establish terrorist financing
that Colombian AML legislation considers money laundering
as a separate crime, following recommendations from the
as an autonomous offense. Several offences are defined in
GAFISUD and the Egmont Group. However, there is no
the legislation, although smuggling and piracy are not included.
publicly available assessment of this law's effectiveness or its
However, at the time of the 2005 FSSA, Colombia had not
compliance with the FATF requirements. Furthermore,
ratified the United Nations Convention for the Suppression of
according to a 2005 report by the International Monetary
Financing of Terrorism. In addition, the 2008 U.S. Department
Fund, the Colombian authorities are deeply committed to
of State (DoS) report remarked that, in spite of recent
combating money laundering.
improvements, the complexity of Colombia's legal system and
limited resources hinder further developments.
General Overview
The Financial Action Task Force of South America (GAFISUD) Colombia's legislative and regulatory framework for AML/CFT
conducted an evaluation of Colombia's compliance with the includes the Criminal Code, Law No. 599 of 2000, which
Financial Action Task Force's (FATF) 40+8 recommendations details money laundering offences; the Financial System
and special recommendations. The results of the assessment Organic Statute Decree No. 663 of 1993, which regulates

www.estandardsforum.org 32

financial institutions; Law No. 1121 of 2006, which identifies
terrorism as a separate offence; the Penal Procedures Code,
Law No. 906 of 2004; and External Resolution No. 34 of
2004, which regulates the supervision of financial institutions.
According to GAFISUD's 2004 report, the Financial
Information and Analysis Unit (UIAF), was created in 1999
as an entity within the Ministry of Finance and Public Credit
(MHCP) by Law No. 526 of 1999. It functions as the
Colombian financial intelligence unit. It is a leading control
authority in Colombia and one of the most relevant entities
in Latin America concerning AML/CFT. GAFISUD found that
the UIAF has adequate powers and systems, but the 2007
Aranguren report noted that the UIAF cannot penalize entities
that do not comply with reporting requirements.
Colombia is not a financial center, but the banking sector is
adequately regulated. However, the U.S. Department of State
(DoS) reported in 2008 that the banking sector, nonbank
financial system, off-shore centers, and trade operations are
used for money laundering purposes. Customs officials are not
properly equipped and trained to detect cross border cash
smuggling, and the government has failed to address corruption
and congestion in the court system.
Galeano Lineros reported in 2007 that the Superintendency
of Finance (SF) issued in Circular No. 22 of that year the
requirements for financial entities to implement the Terrorism
Financing and Assets Laundering Risk Management System
(SARLAFT), a risk-based supervision scheme that includes
internal control procedures that are in line with international
standards. Also, according to Aranguren, as of July 2007, the
government was preparing legislation that aimed at providing
the UIAF with the authority of enforcing reporting
requirements. Moreover, it plans to extend the regulatory
framework to more sectors, including international trade;
vehicle marketing; precious metals; construction; and
professional activities such as accountants and lawyers.
Principle: 1. Legal Systems and
Related Institutional Measures
[Insufficient Information]
According to the 2008 U.S. DoS report, money laundering
has been broadly criminalized in Colombia. As a result of
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
different norms that were passed by the government in 1995,
1997 and 2001, the legalization and concealment of criminal
assets is a criminal offence. Also, the government criminalized
the laundering of a variety of specified types of proceeds.
Moreover, under the criminal code, a person that does not
report money laundering is committing a punishable offence.
The 2004 GAFISUD report added that money laundering was
established as a crime by Article No. 323 of the Criminal
Code (Law No. 599). According to the report, the major
shortcoming in Colombia's compliance with this principle was
the country's failure to properly criminalize terrorist financing.
However, in 2007, the Colombian authorities established
terrorist financing as a separate crime through the
implementation of Law No. 1121. Nevertheless, there is no
publicly available assessment of this law and its effectiveness.
The GAFSUD report found Colombia "largely compliant" with
Recommendation (R) 1 as it relates to money laundering and
"partially compliant" with R 2 regarding the intent and
knowledge of money laundering. Law No. 599 sets penalties
from 6 to 15 years for money laundering crimes and imposes
complementary sanctions for legal persons, including the
closure of firms that commit this kind of crime. The GAFISUD
report also noted that Colombian criminal categories differ
from those established in Recommendation 1 and that there
is not a clear definition of legal persons' responsibilities. The
GAFISUD report also found Colombia to be non-compliant
with Special Recommendation (SR) II because terrorist
financing was not classified as a separate offense. However,
both the U.S. DoS 2008 report and the 2007 report by
Aranguren noted that Law No. 1121 of 2006 amended the
criminal code to establish terrorist financing as a separate
crime, following recommendations from the GAFISUD and the
Egmont Group.
The 2004 GAFISUD report also stated that Colombia
complies with FATF Recommendation 3. The U.S. DoS noted
that Colombian law provides some of the most comprehensive
forfeiture legislation in Latin America. Law No. 793 of 2002
shortened seizure proceedings and imposed a regulatory
structure on them. As a consequence of this change, the
government has improved its capacity to deal with financial
and money laundering crimes. However, in spite of recent
improvements, problems related to the complexity of the legal
33

system and the slow pace of final decisions regarding forfeitures
remain. Nevertheless, in 2007 the Attorney General approved
some guidelines that regulate the seizure process. GAFISUD
also found Colombia to be "non-compliant" with SRIII, because
Colombia had neither freezing mechanisms nor an efficient
system for implementing United Nations resolutions. The U.S.
DoS report mentioned that Colombia implemented a new law
allowing the UIAF to collect information related to terrorist
financing and enabling the immediate seizure of terrorist assets.
However, Colombian legislation is not clear as to the
government's authority to block assets of individuals and
entities included in the UN 1267 Sanctions Committee list.
The GAFISUD report found Colombia to be largely compliant
with R 26 and 30 and compliant with R 32. The U.S. DoS and
GAFISUD reports stated that the UIAF was created in 1999
by Law No. 526 as an entity within the MHCP, with financial
and administrative autonomy. Both the DoS report and a 2005
IMF report noted that the UIAF has adequate powers and
systems, and can oversee the information of several entities,
such as banks, stock exchanges, mutual and investment funds,
wire transfers, and casinos. Moreover, the U.S. DoS report
asserts that the UIAF is considered one of the leaders in
Latin America in anti-money laundering efforts. However, the
GAFISUD noted that the UIAF has no legal authority to detect
and prevent terrorist financing. The report further noted that
the UIAF does not have enough financial and human resources
to fulfill its functions. Moreover, the 2007 Aranguren report
asserted that the UIAF cannot penalize entities that do not
comply with reporting requirements. However, as of July 2007,
the government was preparing a bill aiming to deal with these
shortcomings.
Principle: 2. Preventive Measures -
Financial Institutions
[Insufficient Information]
In terms of this principle, the 2004 GAFISUD report noted
shortcomings in Colombia's customer due diligence (CDD)
regime, and its suspicious transactions reporting requirements.
Most significantly, the report found that financial institutions
were not required to file STRs for terrorist financing. However,
according to the 2008 U.S. DoS report, a recent law (Law No.
1121) addresses this issue. Nevertheless, there is no publicly
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Financial Standards Report Colombia
January 2009
available source assessing the effectiveness of this Law. The
GAFISUD's 2004 report noted that Colombia is partially
compliant with R 5, 6, and 8 regarding CDD. However, the
report added that Colombia did not comply with R 7, noting
that there are no legislative provisions with regard to
correspondent banking. With regards to R 5, the report noted
that CDD measures lack a homogenous legal framework for
the financial sector, and also found a lack of proper
implementation of CDD measures within several sectors of
financial institutions The GAFISUD report further stated that
Colombia complies with R 9. The Colombian legislation only
allows the use of intermediaries in the CDD process in cases
of insurance contracts, and does not permit the use of
intermediaries for the identification of customers. The
GAFISUD report also stated that Colombia largely complies
with R 4 with regard to financial institutions confidentiality,
citing the existence of clear norms that regulate the UIAF
authority to access information. However, the report found
that some problems remain in the area of professional and
capital-markets secrecy. Nonetheless, the 2008 U.S. DoS
report asserted that financial institutions provide ample
financial information, given that there are legal exemptions to
client confidentiality provisions when suspicions of laundering
are detected. The GAFISUD did, however, propose that
Colombia explicitly incorporate the exemption of secrecy
concerning exchange stocks transactions and professional
issues, and allow financial institutions to exchange information.
As to record keeping and wire transfers, the GAFISUD report
asserted that Colombia largely complies with R 10 and partially
complies with SR VII. The report noted that Colombia should
expand the legislation related to record-keeping and establish
specific provisions with regard to wire transfers. Per the U.S
DoS report, Colombian legislation mandates that financial
institutions keep records concerning customers and
transactions. The report found that the banks cooperate
extensively with the government, private consultants, and other
foreign governments. Furthermore, "general negligence laws
and criminal fraud provisions ensure the financial sector
complies with its responsibilities while protecting consumer
rights," the US DoS report added. The GAFISUD report found
Colombia to be compliant with R 11 concerning complex and
unusual transactions and partially compliant with R 21, that
refers to measures to be taken with regard to transactions
34

with countries that do not fulfill FATF recommendations. The
GAFISUD report noted that Colombian law does not directly
establish requirements and specific measures to be adopted
when dealing with the implicit risk entailed by operations and
commercial relations with people of countries that do not
comply with FATF recommendations.
The report also stated that Colombia is partially compliant
with R 13, largely compliant with recommendations 14, 19, and
25, and non-compliant with SR IV with respect to suspicious
transactions reports (STRs). The most significant shortcoming
noted by the report in regards to R 13 was that financial
institutions are not required to prepare STRs relating terrorist
financing activities. However, the 2008 U.S. DoS report noted
that with the enactment of Law No. 1121, banks are now
responsible for compiling and screening client information and
reporting to the UIAF when there are suspicions of terrorist
financing activities. The banks must verify customer data before
providing services. These institutions must compare such data
to the UN's 1267 Sanctions Committee consolidated list and
other sources. However, although they can close such
suspicious accounts, the banks are not able to seize its assets.
With regards to internal controls, compliance, audits, and
foreign branches, the GAFISUD report found Colombia
compliant with R 15 and largely compliant with R 22. The
report noted that Colombia provides a detailed treatment
of the topics included in R 15, whereas there are some
weaknesses concerning the implementation of R 22.
Colombian Law prevents banks from maintaining relations with
shell banks and consequently complies with R 18. The
GAFISUD report also noted that Colombia complies with
R 29, largely complies with Rs 17, 30, and 32, and partially
complies with R 23 with regard to supervisory and oversight
systems. The Financial System Organic Statute establishes the
functions of the financial system supervisor, currently the SF,
and also determines administrative and institutional sanctions.
According to the U.S. DoS report and the 2007 report by
Galeano Lineros, in 2007 the SF issued Circular No. 22, which
required financial entities to implement the SARLAFT, a risk-
based supervising scheme including control measures aligned
to international standards. Finally, GAFISUD reported that
Colombia was partially compliant with R 25 and compliant
with SR VI. Colombia's External Resolution No. 8 of 2000
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Financial Standards Report Colombia
January 2009
establishes that entities providing transfer services must be
supervised.
Principle: 3. Preventive Measures -
Designated non-Financial Business
and Professions
[Insufficient Information]
The 2004 GAFISUD report rated Colombia as partially
compliant with Rs 12 and 16 on CDD and record keeping for
Designated non-Financial Business and Professions (DNFBPs).
The report noted that, as of 2004, Colombia had not
implemented effective controls in order to prevent money
laundering operations within casinos and among notaries.
Moreover, the report found that there were no regulations
regarding real estate agents, dealers in precious metals,
company service providers, or lawyers and accountants.
Lawyers, accountants, dealers in precious metals and company
service providers were not required to prepare STRs.
However, the 2007 reports by the UIAF and by Aranguren
noted that, in order to comply with FATF recommendations,
the UIAF had issued several regulations to implement the
provisions contained in Law. No. 1121. UIAF Resolutions No.
33 and 44 established that notaries are subject to the
supervision of the Superintendency of Registry and Notaries
and must prepare reports on suspicious operations. Moreover,
Aranguren asserted that the government is planning to regulate
more actors, including real estate professionals, lawyers, and
accountants. The 2008 U.S. DoS report added that casinos are
not adequately regulated. The GAFISUD report further stated
that Colombia does not comply with FATF R 24, but is largely
compliant with R 25, although GAFISUD notes that there are
no guidelines to implement AML/CFT measures in the case of
professional nonfinancial activities. Finally, the GAFISUD report
noted that Colombia is non-compliant with R 20 on other
nonfinancial businesses and professions. Despite the above
information, there is no publicly available source assessing the
effectiveness of Law No. 1121.
Principle: 4. Legal Person and
Arrangements & Non-Profit
Organizations
[Insufficient Information]
35

As noted by the GAFISUD's 2004 report, the Superintendency
of Corporations is in charge of controlling and monitoring legal
persons. According to the report, Colombia complies with
FATF R 33 on legal persons and access to beneficial ownership
and the control of information. Colombia also complies with
R 34 on legal arrangements and beneficial owners. Companies
that provide financial services, including trusts, are treated as
financial institutions. Consequently, they are regulated by
Decree No. 663 of 1993 concerning money laundering. The
report found Colombia non-compliant with SR VIII on
nonprofit organizations. However, the 2008 U.S. DoS report
noted that "charities and nongovernmental organizations are
regulated to ensure compliance with Colombian law and to
guard against their involvement in terrorist activity."
Nevertheless, the DoS report made no specific mention of
Colombia's compliance with FATF SRVIII.
Principle: 5. National and
International Co-operation
[Insufficient Information]
GAFISUD's 2004 report found Colombia to be largely
compliant with Rs 31 and 32, but still showed weaknesses with
regard to the flow of information between the UIAF and the
enforcement authorities. Nonetheless, Aranguren reported in
2007 that, as of July 2007, the government was preparing a
bill to provide the UIAF with the authority to enforce the
reporting of information on money laundering.
The 2004 GAFISUD report also noted that Colombia is largely
compliant with R 35 and non-compliant with SR I on
Conventions and United Nations (UN) Special Resolutions.
Colombia fails to comply with SR I due to the inadequacy
of its laws and procedures to implement UN resolutions.
Subsequent to the 2004 GAFISUD report, Law No. 1121
was enacted to address the issues of terrorist financing in
the country, but there is no indication as to whether this
Law addresses Colombia's shortcomings with respect to SR
I. According to the 2008 U.S. DoS report, Colombia is party
to the 1988 Vienna Convention, the International Convention
for the Suppression of the Financing of Terrorism, the UN
Convention against corruption, and the UN Convention
against Transnational Organized Crime (Palermo Convention).
Colombia is part of the Organization of American States Inter-
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Financial Standards Report Colombia
January 2009
American Drug Abuse Control Commission Money
Laundering Experts Working Group, and GAFISUD.
GAFISUD reported that Colombia is compliant with R 36 on
mutual legal assistance (MLA) and R 37 on dual criminality.
However, Colombia is only partially compliant with R 38 on
MLA with reference to confiscation and freezing. Information
concerning the coordination of seizures with other countries is
unavailable. Also, the U.S DoS report asserted that Colombia
has cooperated with the United States and other countries
in some high-profile seizures and prosecutions carried out by
the government. Nevertheless, more coordination is needed,
particularly between the UIAF and the National Customs and
Taxes Office. GAFISUD found Colombia to be compliant with
R 39 on extradition and with R 40 on other forms of
cooperation. According to the GAFISUD and U.S. DoS
reports, the UIAF has agreements with 27 foreign financial
intelligence units and has no constraints on sharing information
with them. GAFISUD found Colombia to be non compliant
with SR V on international cooperation in matters relating
to curbing terrorist financing because, at the time of the
assessment, information concerning terrorist financing was not
available and Colombian legislation did not directly criminalize
terrorist financing. However, the DoS and Aranguren,
reporting in 2008 and 2007, respectively, noted that a new law
was implemented in 2007 that established terrorist financing as
an autonomous crime and regulated the flow of information
relating to this topic.
Sources of Assessment
Financial Action Task Force of South America, "Informe de Evaluación
Mutua sobre Lavado de Activos y Financiamiento del Terrorismo: Informe
de Evaluación Mutua de Colombia [Mutual Evaluation Report on Money
Laundering and Terrorist Financing: Colombian Mutual Evaluation Report],"
GAFISUD, November 2004. Available from Financial Action Task Force of
South America website. Accessed on July 17, 2008. (GAFISUD 2004)
http://www.gafisud.org/pdf/InformeColombia.pdf
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, Including Reports on the Observance of Standards
and Codes on the Following Topics - Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 23, 2008. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
U.S. Department of State, Bureau for International Narcotics and Law
Enforcement Affairs, "International Narcotic Control Strategy Report
2008," March 2008. Available from the U.S. Department of State website.
36

Accessed on July 19, 2008. (U.S. DoS 2008)
http://www.state.gov/p/inl/rls/nrcrpt/2008/vol2/html/1008...
Relevant Organizations
Egmont Group
http://www.egmontgroup.org
Financial Action Task Force of South America - Grupo de Acción
Financiera de Sudamérica (GAFISUD) (website in Spanish only)
http://www.gafisud.org/
Financial Information and Analysis Unit - Unidad de Información y Análisis
Financiero (UIAF) (website in Spanish only)
http://www.uiaf.gov.co
Ministry of Commerce, Industry and Tourism - Ministerio de Comercio,
Industria y Turismo (MCIT) (website in Spanish only)
http://www.mincomercio.gov.co/eContent/home.asp
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/MinHacienda
National Customs and Taxes Office - Dirección de Impuestos y Aduanas
Nacionales (DIAN) (website in Spanish only)
http://www.dian.gov.co/
Office of the Attorney General - Procuraduría General de la Nación
(PGN) (website in Spanish only)
http://www.procuraduria.gov.co
Superintendency of Corporations - Superintendencia de Sociedades (SS)
(website in Spanish only)
Supplementary Sources
http://www.supersociedades.gov.co/ss/drvisapi.dll?
Superintendency of Finance - Superintendencia Financiera (SF)
http://www.superfinanciera.gov.co
Superintencency of Registry and Notaries - Superintendencia de Notariado
y Registro (website in Spanish only)
http://www.supernotariado.gov.co/
Relevant Legislation/Regulation
Law issuing the Penal Code No. 599, 2000 - Ley por la cual se expide el
Código Penal No. 599, 2000 (in Spanish only)
http://www.ramajudicial.gov.co/csj_portal/Min/l5992000.htm
Law issuing the Penal Procedures Code No. 906, 2004 - Ley por la cual se
expide el Código de Procedimiento Penal No. 906, 2004. (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Financial System Organic Statute Decree No. 663, 1993 - Estatuto
Orgánico del Sistema Financiero Decree No. 663, 1993 (in Spanish only).
http://www.superfinanciera.gov.co/Normativa/NormasyReglam...
Law creating the Financial Information and Analysis Unit No. 526, 1999 -
Ley por medio de la cual se crea la Unidad de Información y Análisis
Financiero No. 526, 1999 (in Spanish only)
http://www.secretariasenado.gov.co/leyes/L0526_99.HTM
Law issuing norms for preventing, detecting, researching, and sanctioning
terrorist financing and other dispositions No. 1121, 2006 - Ley por la cual
se dictan normas para la prevencion, detección, investigación y sanción de
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
la financiación del terrorismo y otras disposiciones No. 1121, 2006 (in
Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Assets Recovery Law No. 793, 2002 - Ley de Extinción de Dominio No.
793, 2002 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law approving the 2003-2006 Development National Plan towards a
communal state No. 812, 2003 - Ley por la cual se aprueba el Plan
Nacional de Desarrollo 2003-2006 hacia un Estado comunitario No. 812,
2003 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Resolution imposing notaries of the entire country the reporting obligation
to the Financial Information and Analysis Unit No. 33, 2007 - Resolución
por la cual se impone a los notarios de todos los círculos del territorio
nacional, la obligación de reportar de manera directa a la Unidad de
Información y Análisis Financiero No. 33, 2007 (in Spanish only)
http://www.uiaf.gov.co/?idcategoria=1402#
Resolution establishing a new date for implementing the reporting
obligations requirements for those subject to UIAF 033 of 2007, No. 44,
2007 - Resolución por la cual se fija nueva fecha para la entrada en vigor
de las obligaciones de reporte que deben cumplir los sujetos destinatarios
de la Resolución UIAF 033 de 2007, No. 44, 2007 (in Spanish only)
http://www.uiaf.gov.co/?idcategoria=1404#
Superintendency of Banks External Resolution No. 34, 2004 (the
Superintendency of Banks was replaced by the Superintendency of
Finance)
Aranguren, M., "Lucha contra la Financiación del Terrorismo en Colombia
[Fight against Terrorist Financing in Colombia]," 7th Pan-American
Congress on Assets Laundering and Terrorist Financing Control and
Prevention, Cartagena de Indias, Colombia, July, 2007. Available from
Asobancaria website. Accessed on July 17, 2008. (Aranguren 2007)
http://portal.asobancaria.com/portal/page/portal/Portal_E...
Financial Action Task Force, "Annual and Overall Review of Non-
Cooperative Countries or Territories," Paris: FATF/OECD, June 2005.
Available from FATF website. Accessed on July 21, 2008. (FATF 2005)
http://www.fatf-gafi.org/dataoecd/41/26/34988035.pdf
Financial Action Task Force of South America, "Guía de Contactos y
Procedimientos para la Cooperación Jurídica en Materia de Lavado de
Activos en los Países de GAFISUD [Contacts and Procedures Guidelines
for Legal Cooperation Concerning Money Laundering in GAFISUD
Countries]," December 2006. Available from GAFISUD website. Accessed
on July 17, 2008. (GAFISUD 2006)
http://www.gafisud.org/pdf/COLOMBIA_3.pdf
Financial Information and Analysis Unit, "La Experiencia Colombiana en la
Regulación de Sectores Reportantes por parte de la Unidad de
Información y Análisis Financiero [The Colombian Experience on
Reporting Regulation on the part of the Financial Information and Analysis
Unit]," Colombia, December 2007. Available from INAPCED website.
Accessed on July 17, 2008. (UIAF 2007)
http://www.inapced.com/ced/libreria/libreria2007/UIAF%20v...
Galeano Lineros, J. H., "Un Cambio de Cultura y Gestión en la Prevención
del Riesgo de Lavado de Activos en Colombia [A Cultural and
Management Change in Money Laundering Risk Prevention in Colombia],"
37

7th Pan-American Congress on Money Laundering and Terrorist Financing
Control and Prevention, Cartagena de Indias, Colombia, July, 2007.
Available from Asobancaria website. Accessed on July 17, 2008. (Galeano
Lineros 2007)
http://portal.asobancaria.com/portal/page/portal/Portal_E...
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Iguarán Arana, M., "Colombia Frente a la Financiación del Terrorismo
[Colombia in relation to Terrorist Financing]," 7th Pan-American Congress
on Assets Laundering and Terrorist Financing Control and Prevention,
Cartagena de Indias, Colombia, July, 2007. Available from Asobancaria
website. Accessed on July 17, 2008. (Iguarán Arana 2007)
http://portal.asobancaria.com/portal/page/portal/Portal_E...
38

Core Principles for Effective Banking Supervision
LEVEL OF COMPLIANCE: INTENT DECLARED
Summary
In its 2005 Financial System Stability Assessment (FSSA)
Update, the International Monetary Fund (IMF) stated that the
quality of banking supervision and regulation in Colombia has
improved since the Fund's 1999 Financial Sector Assessment
Program, citing the country's implementation of the Basel Core
Principles. The banking system has been recapitalized, and the
supervisory framework has been revamped. The revision of
the banking law has improved solvency requirements and
created a framework conducive to more effective supervision.
In fact, the IMF noted that Colombia partially implemented
Recommendations 1, 2, and 4 and has fully implemented
Recommendation 3 on additional capital requirements for
market risk. Colombian authorities have also fully implemented
the IMF's 1999 recommendation for the implementation of
a system of prompt corrective action to bank failures.
Notwithstanding these improvements, the 2005 IMF report
identified several weaknesses concerning the independence
of the supervisor, the legal framework, and the provisions
for dealing with nonperforming loans. In their 2008 report,
Estrada and Rueda observed that the necessity of establishing
a better regulatory and supervisory framework has led to
some changes in the institutional structure of supervision. For
instance, in 2005 the Superintendency of Banks and the the
Superintendency of Securities were integrated into the
Superintendency of Finance (SF). Nevertheless, a 2007 article
by Asobancaria noted that the SF lacks sufficient autonomy
and independence. Risk-based regulation and consolidated
supervision remain key issues going forward. The IMF's 2007
Article IV Consultations report (published in 2008) found that
the government has embarked into a reform process aimed
at developing the financial system and improving risk-based
supervision. The report further noted that the authorities have
proposed financial sector reforms that would include, among
other things, strengthening the independence of the SF. Also,
the Ministry of Finance's 2008 report asserted that a project
of financial system reform is being encouraged by the
government, with the objective of establishing an effective
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
consumer protection system and strengthening overall
supervision.
General Overview
According to the International Monetary Fund's (IMF) 2005
Financial System Stability Assessment (FSSA) Update of its
1999 Financial Sector Assessment Program (FSAP) report,
"Colombia has recapitalized the banking system, improved
financial legislation, and revamped the supervisory framework"
(p 1) and "bank supervision and regulation has improved... as
indicated by progress in Basel Core Principles implementation"
(p. 14). Furthermore, the report noted that revisions to the
Banking Law (Law No. 510 in 1999, Decree No. 1720 in
2001, and Law No. 795 in 2003) had improved banks' solvency
requirements and made the supervisory framework more
conducive to effective supervision. The 1999 FSAP report
recommended that Colombia (1) strengthen banks' loan
classification procedures and internal risk management; (2)
strengthen on-site inspection procedures; (3) introduce
additional capital requirements for market risk; and (4)
introduce prudential measures to improve the banking systems
resilience to macroeconomic shocks and credit cycles. The
2005 FSSA observed that the Colombian authorities had
partially implemented recommendation 1, 2, and 4 and had
fully implemented recommendation 3. The Colombian
authorities had also fully implemented the FSAP's
recommendation to introduce a system of prompt corrective
action to bank failures. However, despite the reforms
introduced by the Colombian authorities to the financial
sector's legal and regulatory framework, the FSSA concluded
that serious challenges remained. One such challenge was
identified as the lack of autonomy and independence of the
Superintendency of Banks, the supervisory agency at the time
of the 2005 report. This situation has since been changed.
Additional problems include the lack of a proper legal
framework to protect bank supervisors; and insufficient
provisions available to deal with non performing loans.
39
 Financial Standards Report Colombia
January 2009

The legal framework for banking supervision in Colombia has Financial Institutions Guarantee Fund, and improve efficiency
undergone several reforms, beginning in 1993. A 2008 report within the financial sector.
by the Ministry of Finance and Public Credit (MHCP) asserted
that Law No. 35 of 1993 laid out the objectives and criteria Principle: 1. (1) Clear responsibilities
that the government should follow with relation to financial and objectives for each supervisory
regulation. The 2005 FSSA stated that Law No. 510 of 1999,
Decree No. 1720 of 2001, and Law 795 in 2003 raised
agency.
minimum bank capital requirements for credit and market risk [Insufficient Information]
and established provisions related to the early warning system,
In their 2008 report, Estrada and Rueda asserted that the
corrective actions, and consolidated supervision. The FSSA
necessity of establishing a better supervisory and regulatory
added that the Financial System Organic Statute was
framework led to some structural changes in the supervisory
established by Decree No. 663 of 1993. In a 2008 paper,
model in 2005, including the integration of some supervisory
authors Estrda and Rueda argued that the need to establish
entities. Therefore, the SF was created as result of the merger
a better regulatory and supervisory framework led to some
between the Superintendency of Banks and the
changes in the supervisory structure in 2005, including the
Superintendency of Securities. The Presidency website noted
integration of some supervisory entities. The website of the
that the purpose of this merger was to improve supervision
Colombian Presidency disclosed that the Superintendency of
quality and guarantee the stability of the financial sector.
Finance (SF) was created as result of a merger between the
However, Estrada and Rueda argued that the new structure
Superintendency of Banks and the Superintendency of
has yet to deliver optimal results. The functions and objectives
Securities. An undated report available on the MHCP website
of the SF are set forth in Decree No. 4327 of 2005. Article 8
noted that the provisions of Decree No. 4327 of 2005 assigned
of this Decree establishes the Superintendency as supervisor of
to the SF those functions previously carried out by the
the financial sector, dedicated to generating stability, security,
Superintendency of Banks and the Superintendency of
and confidence, as well as promoting the development of the
Securities. Writing in 2005, Cadena Aguledo et al assert that
securities market. The general functions of the SF are contained
the SF has implemented regulations dealing with solvency
in Decrees No. 2739 of 1991 and No. 663 of 1993, which
margins, credit diversification, market and liquidity risk, and
set out the functions of the former two superintendencies, and
corporate governance, some of which comply with the Basel
in Law No. 964 of 2005. Moreover, a draft Financial Reform
II Accord. However, a 2007 report by Asobancaria noted
Bill has been proposed by the government, in which new
that the SF's dependence upon the MHCP could generate
responsibilities and functions for the SF have been proposed
some risks and conflicts of interest that could negatively affect
and concepts such as "inspection and vigilance" and "control"
financial system safety. The Asobancaria report states that
are clarified. Despite the above information, however, none
there are proposals to move the banking supervisory authority
of the sources mentioned above directly address Colombia's
to the Central Bank of Colombia (CBC).
compliance with this principle.
A 2008 IMF Article IV report noted that a "new risk-based
framework is being implemented gradually" (p. 25). The report Principle: 1.(2) Operational
added that the authorities have proposed a financial sector independence and adequate
reform that would include, among other things, strengthening
resources.
the independence of the SF by establishing fixed-term
[No Compliance]
appointments. According to the 2008 report by MHCP, the
government is encouraging a new financial sector reform that
In its 2005 FSSA, the IMF concluded that the Superintendency
will establish an effective consumer protection system,
of Banks, which was the supervisory agency at the time, lacked
strengthen overall supervision and the functioning of the
autonomy and independence. However, since then, the
Superintendency of Banks and the Superintendency of

www.estandardsforum.org 40

Securities were merged to form the new, unified financial
sector supervisor, the SF. The 2007 Asobancaria report noted
that the SF's dependence upon the MHCP could create certain
risks. One of them is the possibility of a conflict of interest
between the SF and the government if the latter should require
financing from the financial sector. Were this to occur, the
government could conceivably influence the SF to loosen its
prudential standards. To mitigate this problem, there have been
some proposals to move the supervisory authority to the
CBC. An additional source of potential conflict is the SF's
dependence on the national budget for its funding, which
requires that it receive prior spending authorization from the
MHCP. Levies charged to supervised entities constitute a large
share of total income for the SF, but because of this budgetary
requirement, it cannot independently decide on how to use
these funds. This situation has led Asobancaria to conclude that
the SF has no financial independence and is subject to potential
budget restrictions imposed by the MHCP. The report noted
that the resignation of the Superintendent in 2007 brought the
issue of the SF independence to the forefront of public debate.
The 2008 IMF Article IV Consultation report stated that it
"viewed steps to strengthen the independence of the Financial
Superintendent - by providing a fixed-term appointment - as
among the most important of the proposed reforms" (p. 25)
put forth by the Colombian authorities.
Principle: 1.(3) A suitable legal
framework for authorization and
ongoing supervision.
[Insufficient Information]
Prior to the integration of the financial regulator, the Financial
System Organic Statute established by Article 53 of 1993's
Decree No. 663 sets out the requirements for establishing
a financial institution. The MHCP report asserted that the
proposed Financial Reform Bill of 2008 aims to strengthen a
consolidated and comprehensive approach to financial sector
supervision. However, there is insufficient information publicly
available as to Colombia's compliance with this principle.
Principle: 1.(4) A suitable legal
framework to address compliance
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
with laws as well as safety and
soundness concerns.
[Insufficient Information]
Prior to the integration of the financial regulator, the Financial
System Organic Statute established by Article 53 of 1993's
Decree No. 663 sets out the requirements for establishing
a financial institution. The MHCP report asserted that the
proposed Financial Reform Bill of 2008 aims to strengthen a
consolidated and comprehensive approach to financial sector
supervision. However, there is insufficient information publicly
available as to Colombia's compliance with this principle.
Principle: 1.(5) Legal protection for
supervisors.
[Insufficient Information]
According to the IMF's 2005 FSSA, Colombia lacked a proper
legal framework to protect bank supervisors at that time.
However, the IMF reported in 2008 that the government
proposed reforms include more restrictive conditions for the
dismissal of the Financial Superintendent. Nonetheless, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: 1.(6) Arrangement for
sharing of information between
supervisors and protection of
confidentiality of shared information.
[Insufficient Information]
According to the 2005 FSSA, supervisory agencies needed
to institute better formal procedures for cooperation at the
national level. Since that time, the SF was created to serve as a
unified regulator and, according to the 2008 report by Estrada
and Rueda, the objective of the new SF was the creation of
a better supervisory model. Nonetheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
41

Principle: 2. Clearly defined
permissible activities for banks and
control of the use of the word 'bank'.
[Insufficient Information]
There is insufficient information publicly available that directly
address Colombia's compliance with this principle. Article 2 of
the Financial System Organic Statute defines the term "banking
institution," whereas Articles No. 7, 8, and 9 set out the
authorized operations and investments for banking institutions,
and Article No. 10 details the limitations and prohibitions
applicable to such institutions.
Principle: 3. Criteria for structure,
directors, operating plan, controls,
financial condition and capital base.
[Insufficient Information]
Article 53 of the Financial System Organic Statute sets forth
the requirements for establishing a financial institution. The
Superintendency of Banks was in charge of authorizing the
constitution of financial entities when applications satisfied all
the legal requirements. The regulation also established capital
requirements in the licensing process. The request for the
establishment of a financial institution, evaluated by the
Superintendency of Banks, had to contain: (1) proposed by-
laws; (2) the amount and form of integration of capital to be
raised (which needed to be larger than the minimum required);
(3) information related to the participants (directors,
shareholders, etc.); (3) a business plan, including a feasibility
study; and (4) any additional information requested by the
Superintendency of Banks. Articles 72 and 73 of the Financial
System Organic Statute detail the roles, obligations, and
responsibilities of managers and directors of financial entities.
However, the Superintendency of Banks was replaced by SF as
the banking supervisor and there is little information publicly
available that directly addresses Colombia's compliance with
this principle.
Principle: 4. Authority to review and
reject transfer of ownership.
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 5. Authority to review
major acquisitions and investments.
[Insufficient Information]
Prior to the creation of the SF, Article 65 of the Financial
System Organic Statute permitted the Superintendency of
Banks to object to acquisitions proposed by financial
institutions. The banking supervisor enjoyed a period of up
to two months register its objections. However, the
Superintendency of Banks was replaced by the SF as the
banking supervisor and there is little information publicly
available that directly addresses Colombia's compliance with
this principle.
Principle: 6. Minimum capital
adequacy requirements (meet Basle
Capital Accord for internationally
active banks).
[Insufficient Information]
A 2005 report by Cadena Aguledo et al. noted that the SF has
implemented the Basel Capital Accord's capital requirements.
The 2005 IMF FSSA noted that, in 2004, the average capital
adequacy ratio was 14 percent for banks, with all banks
maintaining Capital Adequacy Ratios greater than 9 percent,
the minimum requirement for banks. Nonetheless, there is
insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: 7. A method exists for the
evaluation of procedures related to
loans, investments and portfolio
management.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. However, a 2008
report by the IMF notes that consideration could be given
to "strengthening the assessment of lending standards being
42

followed by the banks, perhaps through a high frequency
survey of bank lending officers" (p.23).
Principle: 8. Policies, practices and
procedures for evaluating the quality
of assets and the adequacy of loan
loss provisions and reserves.
[Insufficient Information]
In its 2005 FSSA Update, the IMF observed that Colombia
had partially implemented its recommendation (made in the
1999 FSAP) regarding this principle. The report stated that
classified loans (substandard, doubtful, or loss) were in levels of
7.9 percent as of September 2004, compared to 16.3 percent
at the end of 1998. The report notes that the ratio of loan-
loss provisions to classified loans had grown from 25 to 54
percent since 1999. As a result, banks' exposure to credit risk
had been lowered. The report, however, observed that there
are still concerns regarding a potential for the underestimation
of provisioning and capital requirements. The authorities were
aware of these concerns and, at the time of the 2005 FSSA
Update, a new regulation was introduced requiring financial
institutions to take into account the estimated credit losses of
their commercial and industrial loans. The 2008 IMF report
notes that Colombia is gradually implementing a new risk based
framework. Banks were "allowed to submit their credit-risk
models for commercial loans in 2007, while consumer credit
and mortgage-based models would be eligible for submission
in 2008 and 2009, respectively" (p. 23). Despite the above
information, none of the available sources directly address
Colombia's compliance with this principle.
Principle: 9. Prudential limits and
management information system on
concentration of exposure.
[Insufficient Information]
Article 17 of Decree No. 663 establishes limits regarding risk
concentration. It limits the amount of operations that financial
institutions can perform with any given borrower. Article 49 of
Decree No. 663 states that the government has the obligation
to establish maximum credit or risk concentration limits.
However, the 2008 IMF report stated that "it would be useful
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
to assess the potential risks associated with any concentration
of banks' lending portfolios (e.g., lending to sectors that are
highly dependent on Venezuela)" (p. 23). Nonetheless, there
is insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: 10. Arm's length rule and
monitoring for connected lending.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 11. Policies and procedures
for country risk and transfer risk.
[Insufficient Information]
According to the 2005 IMF FSSA Update, there has been
no progress with relation to the regulation of country risk
since the 1999 FSAP. The report also noted that foreign
exchange risk appeared to be limited but equity price risk
was of concern. Nonetheless, there is insufficient information
publicly available as to Colombia's compliance with this
principle.
Principle: 12. Measuring and
monitoring market risk. Limit and/or
specific capital charge on market risk
exposure.
[Insufficient Information]
According to the 2005 IMF FSSA Update, "the calculation
of market risk capital requirements has improved; however,
current rules still allow some netting of real value of
mortgages..., and peso-denominated positions, which may
underestimate the value-at-risk" (p.11). A 2005 report by
Cadena Aguledo et al. noted that the SF complies with the
Basel II Accord's main points related to market risk. The report
indicates that Decree No. 1720 mandates banking institutions
to hold capital for market risk. Nonetheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
43

Principle: 13. Comprehensive risk
management processes.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. However, according
to the 2005 IMF FSSA Update, there has been little progress
with respect to the implementation of proper operational and
procedural risk management since the 1999 FSAP.
Principle: 14. Adequate internal
controls.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. However, according
to the 2005 IMF FSSA Update, there has been little progress
with respect to the implementation of proper internal control
procedures since the 1999 FSAP.
Principle: 15. Strict "know-your-
customer" rules and high ethical and
professional standards.
[Insufficient Information]
According to the 2008 U.S. Department of State (DoS) report,
Colombia formally adopted legislation in 1999 to establish
the Financial Information and Analysis Unit (UIAF), within the
MHCP. The UIAF enjoys ample powers to access and analyze
the financial information of public and private entities in
Colombia. Supervised entities, including banks, stock exchanges
and brokers, mutual and investment funds, and others, are
required to report suspicious transactions to the UIAF. In
addition, most entities under the supervision of the UIAF must
establish "know-your-customer" provisions. The 2005 IMF FSSA
Update states that the UIAF has adequate powers. Moreover,
the DoS report notes that, in 2006, a new data network
was inaugurated to share information online and facilitate
cooperation related to the prevention of money laundering
and other financial crimes. The DoS report adds that financial
institutions are required by law to keep records of account
holders and financial transactions over a five-year period. The
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
report states that "Colombia's banks have strict compliance
procedures, and work closely with the government, other
foreign governments, and private consultants to ensure system
integrity." Moreover, the legal framework related to negligence
and criminal fraud assures that the financial sector fulfils its
responsibilities. These entities are also monitored by the SF,
which, in January 2008, implemented a regulation requiring
regulated entities to set up a new system for monitoring and
preventing risks based on international standards. Despite this
information, however, there is no publicly available information
that directly addresses Colombia's compliance with this
principle.
Principle: 16. Effective supervisory
system consisting of on-site and off-
site supervision.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. However, according
to the 2005 IMF FSSA Update, although Colombia has
strengthened its on-site inspection procedures and the training
of on-site inspectors, there had been little progress regarding
the Superintendency of Banks's on- and off-site supervision
functions since the publication of the 1999 FSAP. The
Superintendency of Banks has since been replaced by the SF.
Principle: 17. Regular contact with
bank management and
understanding of bank's operations.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 18. Analytical reports and
statistical returns on solo and
consolidated basis.
[Insufficient Information]
The 2005 IMF FSSA Update report, written before the merger
of earlier supervisory agencies into the SF, noted that there
44

was a significant departure from international best practices
on financial reporting and transparency due to the absence
of audit standards and the divergence of accounting standards
from International Accounting Standards. Additionally, the
report notes that the Superintendency of Banks (and later
the SF) must validate bank financial statements. This generated
a "confusion of roles and responsibilities between the SB
[Superintendency of Banks] and the auditors that needs to be
addressed" (p.15). Nonetheless, there is insufficient information
publicly available as to Colombia's compliance with this
principle.
Principle: 19. Independent validation
of supervisory information through
on-site examination or external
auditors.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 20. Ability to supervise on
a consolidated basis.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 21. Consistent accounting
policies and practices that provide a
true and fair view of the financial
condition of the bank.
[Insufficient Information]
Referring to the old supervisory structure, the 2005 IMF FSSA
Update report noted that there was a significant departure
from international best practices on financial reporting and
transparency due to the absence of auditing standards and the
fact that Colombian accounting standards did not align with the
International Accounting Standards. Additionally, the report
notes that the Superintendency of Banks (now the SF) must
validate bank financial statements. This generated a "confusion
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
of roles and responsibilities between the SB [Superintendency
of Banks] and the auditors that needs to be addressed" (p.15).
Nonetheless, there is insufficient information publicly available
as to Colombia's compliance with this principle.
The 2003 World Bank and IMF Report on the Observance
of Standards and Codes (ROSC) noted that Law No. 222 of
1995 provided the Superintendency of Banks (now the SF)
with the authority to issue accounting guidelines for the entities
it supervises. The ROSC further noted that "for prudential
regulation of banks, the SB [Superintendency of Banks] issues
specific accounting rules, valuation methods, and disclosure
requirements that are applicable not only to regulatory
reporting purposes but also to those who prepare general-
purpose financial statements" (p.3). Inspectors of the
Superintendency of Banks were capable of taking action in
cases in which they found violations of accounting and auditing
requirements. The sanctions ranged from monetary penalties
to suspensions and dismissals of advisors and auditors.
Principle: 22. Adequate supervisory
measures to ensure timely corrective
action.
[Insufficient Information]
According to the 2005 FSSA Update, the Colombian
authorities fully implemented the 1999 FSAP's
recommendation to introduce a system of prompt corrective
actions in the case of bank failures. However, the report does
not state the extent to which these measures comply with
the Basel Committee's requirements for this principle. Since
the 2005 FSSA Update, the supervisory agency has changed
from the Superintendency of Banks to the unified SF and there
is insufficient information publicly available as to Colombia's
current compliance with this principle
Principle: 23. Banking supervisors
must practice global consolidated
supervision over their internationally-
active banking organizations.
[Insufficient Information]
45

There is insufficient information publicly available as to
Colombia's compliance with this principle. The IMF's 2005
FSSA Update noted that the Superintendency of Banks
(replaced by the SF) was not able to adequately examine the
relationship between local banks and their foreign branches.
Relevant Legislation/Regulation
Principle: 24. International exchange
of information with other
supervisors.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: 25. Supervision of local
operation of foreign banks and
information sharing with home
country supervisors.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Sources of Assessment
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," Country Report No. 05/
287, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 23, 2008. (IMF 2005b)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
World Bank and International Monetary Fund, "Report on the Observance
of Standards and Codes (ROSC): Accounting and Auditing - Colombia",
Washington, D. C.: WB and IMF, July 2003. Available from World Bank
website. Accessed on May 28, 2008. (WB&IMF 2003)
http://www.worldbank.org/ifa/rosc_aa_col.pdf
Supplementary Sources
Relevant Organizations
Central Bank of Colombia - Banco de la República (CBC)
http://www.banrep.gov.co/index_eng.html
Financial Institutions Guarantee Fund - Fondo de Garantías de Instituciones
Financieras (FOGAFIN) (website in Spanish only)
http://www.fogafin.gov.co/Principales/principal.html
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/MinHacienda
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Superintendency of Corporations - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?
Superintendency of Finance - Superintendecia Financiera (SF)
http://www.superfinanciera.gov.co/
Norms the Government must follow for regulating stock, financial, and
insurance activities Law No. 35, 1993 - Normas a las cuales debe sujetarse
el Gobierno Nacional para regular las actividades financiera bursátil y
aseguradora Ley No. 35, 1993 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Financial Reform Law No. 510, 1999 - Ley de Reforma Financiera No. 510,
1999 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Public Stock Market Law No. 964, 2005 - Ley del Mercado Público de
Valores No. 964, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Law adjusting some norms of the Financial System Organic Statute and
issuing other dispositions No. 795, 2003 - Ley por la cual se ajustan algunas
normas del Estatuto Orgánico del Sistema Financiero y se dictan otras
disposiciones No. 795, 2003 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Concourse Processes Regime Law No. 222, 1995 - Ley de Régimen de
Procesos Concursales No. 222, 1995 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Decree establishing the minimun solvency ratio for Credit Institutions No.
1720, 2001 - Decreto por el cual se establece la relación mínima de
solvencia de los Establecimientos de Crédito No. 1720, 2001 (in Spanish
only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Decree merging the Colombian Superintendency of Banks with the
Superintendency of Securities and modifying its structure No. 4327, 2005 -
Decreto por el Cual se fusiona la Superintendencia Bancaria de Colombia
en la Superintendencia de Valores y se modifica su estructura No. 4327,
2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Financial System Organic Statute Decree No. 663, 1993 - Decreto del
Estatuto Orgánico del Sistema Financiero No. 663, 1993 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Asobancaria, "Dónde Encaja Mejor la Supervisión Financiera? [Where Does
Financial Supervision Fit Better?]," Report No. 613, Asobancaria, July 2007.
Available from Asobancaria webpage. Accessed on May 23, 2008.
(Asobancaria 2007)
http://www.asobancaria.com/upload/docs/docPub3974_2.pdf
Cadena Aguledo, J., et al, "La Banca Colombiana Frente al Pilar I del
Acuerdo de Basilea II [Colombian Banks in relation to Pillar I of the Basel II
Accord]," Bogotá: Universidad Sergio Arboleda, 2005. Available from
Universidad Sergio Arboleda website. Accessed on May 29, 2008. (Cadena
Aguledo et al 2005)
http://www.usergioarboleda.edu.co/civilizar/revista10/ban...
46

Cardenas, M. and Partow, Z., "Does Independence Matter - Case Studies
from Colombia", Working Paper R-341, Inter-American Development
Bank, October 1998. (Cardenas & Partow 1998)
http://www.iadb.org/res/publications/pubfiles/pubR-341.pdf
Colombian Superintendency of Banks, "De la Teoría a la Práctica Local:
Basilea y el SARC [From Theory to Local Practice: Basel and the SARC],"
Cartagena: Superintendency of Banks, February 2004. Available from
World Bank website. Accessed on May 29, 2008. (SUPERINTENDENCY
OF BANKS 2004)
http://info.worldbank.org/etools/docs/library/86213/01-de...
Colombian Superintendency of Banks, "Documento de Metodología de
Inspección [Inspection Methodology Document]," Superintendency of
Banks, November 2005. Available from Superintendency of Finance
website. Accessed on May 29, 2008. (SUPERINTENDENCY OF BANKS
2005)
http://www.superfinanciera.gov.co/ComunicadosyPublicacion...
Estrada, D., and Gutiérrez Rueda, J., "Supervisión y Regulación del Sistema
Financiero: Modelos, Implicaciones y Alcances [Financial System Supervision
and Regulation: Models, Implications, and Scope]," Borradores de Economía
No. 490, Bogotá: Colombian Central Bank, 2008. Available from
Colombian Central Bank website. Accessed on May 23, 2008. (Estrada &
Gutiérrez Rueda 2008)
http://www.banrep.gov.co/docum/ftp/borra490.pdf
International Monetary Fund, "Colombia: 2005 Article IV Consultation and
Fourth Review Under the Stand-By Arrangement, Requests for Waiver of
Nonobservance of Performance Criteria and the Completion of the
Fourth Review, and Request for Stand-By Arrangement - Staff Reports;
Public Information Notice and Press Release on the Executive Board
Discussion; and Statement by the Executive Director for Colombia",
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Country Report No. 05/154, Washington, D.C.: IMF, May 2005. Available
from International Monetary Fund website. Accessed on May 23, 2008.
(IMF 2005a)
http://www.imf.org/external/pubs/ft/scr/2005/cr05154.pdf
International Monetary Fund, "Colombia: 2007 Article IV Consultation -
Staff Report; and Public Information Notice on the Executive Board
Discussion," Country Report No. 08/31, Washington, D.C.: IMF, January
2008. Available from International Monetary Fund website. Accessed on
May 7, 2008. (IMF 2008)
http://www.imf.org/external/pubs/ft/scr/2008/cr0831.pdf
Ministry of Finance and Public Credit, "Reforma Financiera [Financial
Reform]," Bogotá: MHCP, April 2008. Available from Ministry of Finance
and Public Credit website. Accessed on May 28, 2008. (MHCP 2008)
http://www.minhacienda.gov.co/portal/page/portal/MinHacie...
Ministry of Finance and Public Credit, "Exposición de Motivos: Proyecto de
Ley de Reforma Financiera [Exposition of Reasons: Financial Reform Bill],"
MHCP, n. d.. Available from Colombian Stock Market website. Accessed
on May 28, 2008. (MHCP n.d.)
http://www.bvc.com.co/bvcweb/administracion/editor/homeFi...
Presidency of Colombia Website. Last updated on July 30, 2006. Accessed
on May 29, 2008. (Presidency website)
http://www.presidencia.gov.co/sne/2005/noviembre/28/04282...
http://www.presidencia.gov.co/sne/2005/junio/23/04232005.htm
U.S. Department of State, Bureau for International Narcotics and Law
Enforcement Affairs, "International Narcotic Control Strategy Report
2008," U.S Department of State, March 2008. Available from U.S.
Department of State website. Accessed on July 19, 2008. (U.S. DoS 2008)
http://www.state.gov/p/inl/rls/nrcrpt/2008/vol2/html/1008...
47
 Financial Standards Report Colombia
January 2009

Core Principles for Systemically Important Payment Systems

LEVEL OF COMPLIANCE: INTENT DECLARED

Summary Systemically Important Payment Systems (CPSIPS). According

to the CBC 2004 report, Colombia exhibits a high level of
There are a variety of entities that provide payment services
compliance with the CPSIPS. However, there are some
in Colombia, and these, in turn, are subject to regulation by
weaknesses related to legal and vigilance issues.
different organizations. According to a 2003 report by the
Central Bank of Colombia (CBC), the Deposit Account System
Since 1998, the CUD has operated as a real time gross
(CUD) is a particularly relevant system. It is the Colombian
settlement (RTGS) system. According to the 2004 CBC report,
high-value system for the management of resources deposited
CUD settles most payment transactions in the country,
in CBC accounts. It is a real time gross settlement system and,
accounting for 88.7 percent of the total value of transactions
according to the 2004 CBC report, settled 88.7 percent of the
in 2004. The 2003 CBC report noted that Law No. 31 of
total value of transactions in 2004. Moreover, according to the
1992 stipulates that the CBC is responsible for guaranteeing
2004 CBC report, Colombia has a high degree of compliance
the smooth operation of internal and external payments.
with the Committee on Payment and Settlement Systems'
According to Law No. 795 of 2003, the government must
(CPSS) Core Principles for Systemically Important Payment
regulate payment systems and the activities that are not under
Systems (CPSIPS). In its 2005 Financial System Stability
the jurisdiction of the CBC. The CBC board of directors has
Assessment (FSSA) Update, the International Monetary Fund
issued regulations that set out access conditions, rights, and
observed that, most of the weaknesses identified in the legal
obligations of participants and the CBC. Nonetheless, the 2005
framework for payment systems in Colombia would be
International Monetary Fund (IMF) Financial System Stability
addressed once the Securities Market Law came into effect.
Assessment (FSSA) Update pointed out that the CBC lacks the
As reported on the Financial Information and Analysis Unit
legal capacity for proper oversight of clearance and settlement
website, this law (Securities Market Law No. 964) was
systems. The FSSA concluded that most of the weaknesses
approved by Congress in 2005. Nonetheless, there is no third
identified in the legal framework for payment systems in
party assessment or detailed self assessment corroborating this
Colombia would be addressed once the draft Securities
statement in the 2004 CBC report and, since the 2005 FSSA
Market Law No. 964 came into effect. The report noted that
Update, there has been no publicly available source addressing
the new law would "cover issues such as the legal validation
Colombia's compliance with the CPSS's CPSIPS.
of multilateral netting, the protection of the system against
bankruptcy procedures, settlement finality, protection of
General Overview collateral arrangements, pledge, segregation of accounts, the
According to a 2005 report by the Central Bank of Colombia legal definition of repos, central counterparties, and novation"
(CBC), the country has different payment systems, some of (p.24). The report added that the draft law would improve
which are managed by the CBC and some by the private Colombia's compliance with the CPSS. As reported on the
sector. However, according to a 2003 report by the CBC, Financial Information and Analysis Unit (UIAF) website, this
the Deposit Account System (CUD) is a particularly relevant draft law was approved by Congress in 2005 and took effect
system. It is the Colombian high-value system for the on July 8 of that year. The 2005 IMF report also noted that the
management of resources deposited on CBC accounts. Based central bank lacked clear legislative authority for the oversight
on information provided on the CBC's website, the CUD of clearance and settlement systems. The Securities Market
has put in place international standards concerning technology, Law, however, does not address this issue.
communication, and security, following the Committee on
Payment and Settlement Systems' (CPSS) Core Principles for

www.estandardsforum.org 48

The CBC's 2005 report identifies six different payment systems
operated by the CBC: (1) the CUD; (2) the Central Securities
Depository (DCV), a system related to the management of
securities by means of electronic registries; (3) the Electronic
Check Clearing System (CEDEC), that clears and settles
checks; (4) the Electronic Trading System (SEN), related to
government bonds; (5) the Clearing System for Electronic
Interbank Transfers (CENIT), which is a clearing chamber for
electronic payments; and (6) the System for International
Operations (SOI). According to Nieto Olivar and Torres
Alvares, writing in 1999, the systems operated by the private
sector include the Automated Clearinghouse, which provides
services similar to those of the CENIT. A 2007 report by
Asobancaria noted that another body related to Colombia's
payment system supervision is the Superintendency of Finance
(SF), which monitors low-value payment systems. The
Presidency website discloses that the SF was created in 2005
as a result of the merger of the Superintendency of Banks and
the Superintendency of Securities. The functions and objectives
of the SF were established by Decree No. 4327 of 2005.
The CBC's 2005 report has claimed that the implementation
of electronic payment services has modernized Colombian´s
payment system by increasing efficiency and facilitating financial
transactions, thus putting the CBC at the forefront of reforms
in this area in Latin America. However, the 2005 IMF report
indicated that, although the systemic importance of the check
system has been reduced significantly, more improvements are
needed, because the checks that are settled are of high value
and some financial institutions use them to settle payments.
Thus, the CBC should continue to encourage electronic
payments. The CBC's 2005 report identified that its primary
challenge in instituting this recommendation will be to gain the
cooperation of large financial institutions. In 2008, the CBC
reported that Colombia's modernization program includes the
establishment of a number of new systems that aim to reduce
costs, mitigate risks, and increase efficiency.
Principle: I. The system should have a
well-founded legal basis under all
relevant jurisdictions.
[Insufficient Information]
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
In 2005, an IMF FSSA Update concluded that most of the
weaknesses in the legal framework for payment systems in
Colombia would be addressed once the draft Securities
Market Law (No. 964) came into effect. The report noted that
the new law would "cover issues such as the legal validation
of multilateral netting, the protection of the system against
bankruptcy procedures, settlement finality, protection of
collateral arrangements, pledge, segregation of accounts, the
legal definition of repos, central counterparties, and novation"
(p.24). As reported on the UIAF website, this draft law was
approved by Congress in 2005. The IMF report noted that the
central bank lacked clear legislative authority for the oversight
of clearance and settlement systems. The Securities Market
Law, however, does not address this issue. A 2007 report by
Asobancaria noted that the Colombian institutional framework
empowers the CBC to regulate, monitor, and operate some
of the clearance and settlement systems, including the high-
value system. Other, low-value systems are supervised by the
Ministry of Finance and Public Credit (MHCP) and the SF.
This framework yields three significant deficiencies. First, the
regulatory and supervisory norms differ across the various
settlement systems. Second, similar services are provided by
public and private entities under different regulatory regimes.
Third, none of the regulators have a view of the payment
system as a whole, nor do they have sufficient information
to appropriately evaluate risk. However, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: II. The system's rules and
procedures should enable
participants to have a clear
understanding of the system’s impact
on each of the financial risks they
incur through participation in it.
[Insufficient Information]
The 2001 report by the Center for Latin American Monetary
Studies and World Bank (CEMLA&WB) states that the CBC
is responsible for the supervision of payment systems and the
monitoring of systemic risk. This is done through the analysis of
information on payment flows and the interaction with market
participants, i.e. financial institutions. The report notes that
49

"when the Central Bank directly provides payment services; it
meets its regulatory and supervisory objectives, on one hand,
by means of subscription by participants of bilateral contracts
and, on the other, through cooperation with the private sector
and moral suasion. The bilateral contracts explicitly establish all
participants, obligations and responsibilities and the conditions
for their operations, service pricing, and sanctions for non-
compliance" (p.32). Nevertheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: III. The system should have
clearly defined procedures for the
management of credit risks and
liquidity risks, which specify the
respective responsibilities of the
system operator and the participants
and which provide appropriate
incentives to manage and contain
those risks.
[Insufficient Information]
According to the 2001 CEMLA&WB, the CBC had been active
in reducing risks in the payment system. The most important
action has been the establishment of the RTGS system to
operate on credit risk between participants. According to a
2003 CBC report, all transactions operated through CUD
should follow the RTGS principle. In addition, considering that
this type of system requires more liquidity, the CBC
incorporated mechanisms for managing liquidity risks, such as
the provision of intraday liquidity based on repos. The
CEMLA&WB report added that, in recent years, other
measures have been followed to reduce the liquidity risk of the
system and to guarantee its smooth functioning. The report
stated that, as a result of the lack of payment queues, "when a
participant does not have the funds in its account to process
the payment, the transaction is rejected. However, the
transaction can be successively reactivated by the participant
without having to be processed again by the system, since
the operation is held in the system's memory" (p. 93).
Nevertheless, there is insufficient information publicly available
as to Colombia's compliance with this principle.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Principle: IV. The system should
provide prompt final settlement on
the day of value, preferably during
the day and at a minimum at the end
of the day. (Systems should seek to
exceed the minima included in this
Core Principle.)
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. Regarding the final
settlement of the system, the 2004 CBC report asserts that the
securities, foreign exchange, and money markets settle their
operations on the same day. Furthermore, CUD operations
are processed continuously during the day when they are
reported to the CBC and are settled immediately (in real
time) if there are available funds in the user's deposit account.
The CBC website discloses that institutions that operate with
the CUD must be affiliated to the CBC's Electronic Services,
known by the acronym SEBRA. SEBRA was established to
allow for an on-line connection in real time between financial
and securities intermediaries and the CBC. The CEMLA&WB
2001 report describes SEBRA as a remote entry port to
the central bank's electronic applications which ensures that
transactions are quickly, safely, and efficiently carried out and
eliminates the use of physical documents. According to the
report, the CBC has adopted several measures to guarantee
the smooth functioning of the CUD. These include: (1) allowing
authorized institutions by the intraday repos mechanism to get
additional liquidity for transactions using the payment system;
(2) making certain that the financial system starts the day with
sufficient liquidity to carry out its operations; (3) permitting
the conversion of intraday repos into overnight repos for
authorized entities, without the loss of collateral; and (4)
establishing an automatic overnight repo to banks presenting a
shortfall in the first check-clearing session.
Principle: V. A system in which
multilateral netting takes place
should, at a minimum, be capable of
ensuring the timely completion of
daily settlements in the event of an
50

inability to settle by the participant
with the largest single settlement
obligation. (Systems should seek to
exceed the minima included in this
Core Principle.)
[Insufficient Information]
The 2001 CEMLA&WB report and the 1999 article by Nieto
Olivar and Torres Alvarez note that the CUD is a RTGS
system. However, there are other systems that use a netting
scheme, e.g. the CEDEC, the CENIT and the Automated
Clearinghouse Colombia. Nevertheless, there is insufficient
information publicly available as to Colombia's compliance with
this principle.
Principle: VI. Assets used for
settlement should preferably be a
claim on the central bank; where
other assets are used, they should
carry little or no credit risk and little
or no liquidity risk.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. According to the
2001 CEMLA&WB report, the CUD allows financial
institutions to order payments from their accounts at the CBC
to other financial institutions accounts also at the CBC.
Moreover, the report states that "credit institutions
(commercial and mortgage banks, financial institutions,
including leasing companies and financial cooperatives), public
banks and rediscount entities, trust companies, pension funds
managers, capital market operators (broker-dealers; stock
exchanges and the private central securities depository),
fiduciary, capitalization and insurance companies, and
clearinghouses, including the clearing "networks" for debit and
credit cards, all have a deposit account in Colombian pesos at
the [CBC], on which they settle payment transactions on an
RTGS basis" (p.94).
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Principle: VII. The system should
ensure a high degree of security and
operational reliability and should
have contingency arrangements for
timely completion of daily
processing.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. According to the
2004 CBC report, the legal framework in Colombia provides
no certainty about collateral protections in cases of insolvency,
nor does it empower an institution with a supervisory role for
the payment system. CUD's regulations - established by the
External Regulatory Communication, DSEP No. 158 of 2007
- disclose that the CBC has contingency schemes to allow for
the continuous operation of the CUD. The 2003 CBC report
notes that the central bank has taken preventive actions to
reduce the probability of system errors and contingency plans
have been established for communications systems and for
hardware and software as well.
Principle: VIII. The system should
provide a means of making payments
which is practical for its users and
efficient for the economy.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. In its 2008 report,
the CBC noted that there has been an important
modernization of the Colombian payment system. As a result,
transparency and market depth has been improved, monetary
policy has become more effective, risks and costs have been
reduced, efficiency and security have been increased, and
procedures have been modernized. In addition, the Economist
Intelligence Unit's (EIU) 2005 report stated that "the electronic
payments system is modern and efficient and has gradually
implemented emerging technologies. The high-value system
provides financial stability, whereas the low-value system
fosters competition, leading to increased efficiency" (p.31). The
report also stated that improvements in low-value systems
51

will reduce financial institutions costs. This should lead to
reductions in fees, thus benefiting consumers and increasing
the use of electronic payment products. However, the report
also noted that Colombia could achieve further improvements
regarding liquidity issues. The report mentions the existence
of plans to create a "hybrid system that will simulate the
net settlement obligations of each participant before gross
payments are processed" (p.31). The EIU report indicates that
the CBC's major challenge in the implementation of these plans
will be securing the cooperation of large financial institutions.
Principle: IX. The system should have
objective and publicly disclosed
criteria for participation, which
permit fair and open access.
[Insufficient Information]
The 2001 CEMLA&WB report noted that a wide variety of
financial institutions, broker-dealers, and investors can access
the CUD system. Furthermore, the CBC website reveals that
all the entities that are authorized to open a deposit account
at the CBC can operate through the CUD. The entities must
be affiliated to the SEBRA in order to participate in the system.
Nevertheless, there is insufficient information publicly available
as to Colombia's compliance with this principle.
Principle: X. The system's
governance arrangements should be
effective, accountable and
transparent.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Principle: A. The central bank should
define clearly its payment system
objectives and should disclose
publicly its role and major policies
with respect to systemically
important payment systems.
[Insufficient Information]
According to the 2005 IMF report, the CBC "should seek
clear legislative authority for the oversight of clearance and
settlement systems. This would provide the central bank with
the legal authority to ensure the development and operation
of payment mechanisms that effectively contribute to the
integrity, efficiency and safety of all financial markets and the
operation of monetary policy" (p.24). The report further noted
that the CBC should publicly disclose its objectives and
implementation strategies regarding all significant payment
system matters and guide private sector participants on topics
related to the governance, management, ways of dealing with
risks, and the policies that must be satisfied by all transactions.
The 2007 Asobancaria report noted that, contrary to the
majority of countries, in Colombia the CBC does not play
a supervisory role of the payment systems, because there is
no legislation that allows it to do so. The legal framework
that determines the intervention of the CBC is established by
Law No. 31 of 1992. This law only sets out roles related to
monetary, exchange rate, and credit policies for the regulation
of monetary circulation, liquidity, and the operation of the
payment system. However, the report notes that some roles,
responsibilities, rights, and obligations are established in the
payment systems regulations of the CBC. However, there is
insufficient information publicly available as to Colombia's
compliance with this principle.
Principle: B. The central bank should
ensure that the systems it operates
comply with the Core Principles.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. According to the
52

2005 IMF report, the CBC "should seek clear legislative
authority for the oversight of clearance and settlement systems.
This would provide the central bank with the legal authority
to ensure the development and operation of payment
mechanisms that effectively contribute to the integrity,
efficiency and safety of all financial markets and the operation
of monetary policy" (p.24).
Principle: C. The central bank should
oversee compliance with the Core
Principles by systems it does not
operate and it should have the ability
to carry out this oversight.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: D. The central bank, in
promoting payment system safety
and efficiency through the Core
Principles, should cooperate with
other central banks and with any
other relevant domestic or foreign
authorities.
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle. According to a 2000
report by Nieto Olivar and Torres Álvarez, the CBC has signed
agreements with the Central Banks of member countries of the
Latin-American Integration Association; Dominican Republic;
and China.
Sources of Assessment
Center for Latin American Monetary Studies and World Bank, "Payments
and Securities Clearance and Settlements Systems in Colombia," First
English edition, Mexico City: Center for Latin American Monetary Studies,
August 2001.Available from the Western Hemisphere Payments and
Securities Settlement Forum website. Accessed on May 6, 2008
(CEMLA&World Bank 2001)
http://www.ipho-whpi.org/pdf/reporte_colombia-eng.pdf
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the following topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," IMF Country Report No.
05/287, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 6, 2008 (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
Relevant Organizations
Central Bank of Colombia - Banco de la República (CBC)
http://www.banrep.gov.co/index_eng.html
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/MinHacienda
Superintendency of Corporations - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?
Superintendency of Finance - Superintendecia Financiera (SF)
http://www.superfinanciera.gov.co/
Financial Information and Analysis Unit - Unidad de Información y Análisis
Financiero (UIAF) (website in Spanish only)
http://www.uiaf.gov.co
Relevant Legislation/Regulation
Securities Market Law No. 964, 2005 - Ley de Mercado de Valores No.
964, 2005 (In Spanish only)
http://www.uiaf.gov.co/index.php?idcategoria=360&uiaf_uia...
Law modifying some norms of the Financial System's Organic Statute, and
establishing Other Dispositions No. 795, 2003 - Ley por la cual se ajustan
algunas Normas del Estatuto Orgánico del Sistema Financiero y se dictan
Otras Disposiciones No. 795, 2003 (In Spanish only)
http://www.fogacoop.gov.co/Normatividad/LEY%20795%20DE%20...
Central Bank of Colombia Law No. 31, 1992 - Ley del Banco de la
República No. 31, 1992 (In Spanish only)
http://www.secretariasenado.gov.co/leyes/L0031_92.HTM
Decree by which the Superintendency of Banks merges with the
Superintendency of Securities No. 4327, 2005 - Decreto por el cual se
fusiona la Superintendencia Bancaria en la Superintendencia de Valores y se
modifica su Estructura No. 4327, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
External Regulatory Communication DFV No. 135, 2007 - Circular
Reglamentaria Externa DFV No. 135, 2007 (in Spanish only)
http://www.banrep.gov.co/documentos/reglamentacion/pdf/As...
External Regulatory Communication DSEP No. 152, 2008 - Circular
Reglamentaria Externa DSEP No. 152, 2008 (in Spanish only)
http://www.banrep.gov.co/documentos/reglamentacion/Noveda...
External Regulatory Communication DSEP No. 155, 2008 - Circular
Reglamentaria Externa DSEP No. 155, 2008 (in Spanish only)
http://www.banrep.gov.co/documentos/reglamentacion/CEDEC/...
53

External Regulatory Communication DSEP No. 158, 2007 - Circular
Reglamentaria Externa DSEP No. 158, 2007 (in Spanish only)
http://www.banrep.gov.co/documentos/reglamentacion/CUD/20...
Regulation of the Central Securities Depository Resolution No. 314, 2001
- Resolución del Reglamento del Depósito Central de Valores No. 314,
2001 (in Spanish only)
http://www.banrep.gov.co/documentos/sistema-financiero/pd...
Superintendency of Securities Structure Decree No. 2739, 1991 - Decreto
de la Estructura de la Superintendencia de Valores No. 2739, 1991 (in
Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Financial System Organic Statute Decree No. 663, 1993 - Decreto del
Estatuto Orgánico del Sistema Financiero No. 663, 1993 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Supplementary Sources
Asobancaria, "Los Sistemas de Pago de Bajo Valor: Algunas Reflexiones
Acerca de su Operación, Regulación y Supervisión [Low-Value Payment
Systems: Some Considerations about their Operation, Regulation and
Supervision]," Report No. 632, November 2007. Available from
Asobancaria webpage. (Asobancaria 2007)
http://www.asobancaria.com/upload/docs/docPub4201_2.pdf
Central Bank of Colombia, "Informe de la Junta Directiva al Congreso de la
República [Report by the Board of Director to the Congres of the
Republic]," Central Bank of Colombia, July 2003. Available from Central
Bank of Colombia website. Accessed on June 14, 2008. (CBC 2003)
http://www.banrep.gov.co/documentos/junta-directiva/pdf/i...
Central Bank of Colombia, "Problemáticas Centrales del Sistema de Pagos
Colombiano [Central Problems in the Colombian Payment System],"
November 2004. Available from the Central Bank of Colombia website.
Accessed on May 14, 2008. (CBC 2004)
http://www.banrep.gov.co/documentos/seminarios/ppt/BR-Sem...
Central Bank of Colombia, "Informe de la Junta Directiva al Congreso de la
República [Report by the Board of Directors to the Congress of the
Republic]," July 2005. Available from Central Bank of Colombia webpage.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Accessed on May 21, 2008. (CBC 2005)
http://www.banrep.gov.co/documentos/junta-directiva/pdf/i...
Central Bank of Colombia, "El Sistema de Pagos [The Payment System],"
Bogotá, Colombia, May 2008. Available from the Central Bank of Colombia
website. Accessed on May 20, 2008. (CBC 2008)
http://www.banrep.gov.co/documentos/seminarios/2008/Banca...
Central Bank of Colombia website. Last updated on May 20, 2008.
Accessed on May 20, 2008 (CBC website)
http://www.banrep.gov.co/sistema-financiero/sip_cud_rg.ht...
http://www.banrep.gov.co/reglamentacion/rg_index.htm
Economist Intelligence Unit, "Assessing Payments Systems in Latin
America," White Paper Sponsored by Visa International, May 2005.
Available from Economist Intelligence Unit webpage. Accessed on May 15,
2008. (EIU 2005)
http://graphics.eiu.com/files/ad_pdfs/eiu_Visa_eng_WP.pdf
Ministry of Finance and Public Credit, "Exposición de Motivos: Proyecto de
Ley de Reforma Financiera [Exposition of Reasons: Financial Reform Bill],"
n.d. Available from Colombian Stock Exchange website. Accessed on May
28, 2008. (MHCP n.d.)
http://www.bvc.com.co/bvcweb/administracion/editor/homeFi...
Nieto Olivar, G. E., and Torres Alvarez, N., "Participación del Banco de la
República en el Sistema de Pagos Colombiano [Participation of the Central
Bank of Colombia in the Colombian Payment System]," December 2000.
Available from Central Bank of Bolivia webpage. Accessed on May 18,
2008. (Nieto Olivar & Torres Alvarez 2000)
http://www.bcb.gov.bo/pdffiles/iniciales/revistas/diciemb...
Presidency of Colombia website. Last updated on May 23, 2008. Accessed
on May 23, 2008 (Presidency website)
http://www.presidencia.gov.co/sne/2005/junio/23/04232005.htm
http://www.presidencia.gov.co/sne/2005/noviembre/28/04282...
Unidad de Información y Análisis Financiero website. Last updated on May
6, 2008. Accessed on May 6, 2008. (UIAF website)
http://www.uiaf.gov.co/index.php?idcategoria=360&uiaf_uia...
http://www.uiaf.gov.co
54
 Financial Standards Report Colombia
January 2009

Special Data Dissemination Standard

LEVEL OF COMPLIANCE: COMPLIANCE IN PROGRESS

Summary objectives. In addition, Decree No. 111 of 1996 requires the

Fiscal Policy Council (CONFIS) of the Ministry of Finance and
Colombia has been a subscriber to the International Monetary
Public Credit (MHCP) to monitor the non-financial sector, and
Fund's (IMF) Special Data Dissemination Standard (SDDS)
Decree No. 85 of 1995 addresses domestic and external debt
since May 31, 1996. The country meets SDDS specifications
data. Finally, Decree No. 1633 of 1960 and Law No. 31 of
for the coverage, periodicity, and timeliness of data and for
1992 regulate the collection of information by the Central Bank
dissemination of advance release calendars for most data
of Colombia (CBC).
categories. Nonetheless, in 2008, the IMF noted the existence
of some weaknesses regarding the elaboration of real sector
According to the 2008 IMF report, DANE is responsible for
and fiscal information. Also, the methodologies for estimation
the compilation of the national accounts statistics. The DANE
of certain data are not available on the IMF SDDS website. The
website discloses that the agency is responsible for planning,
National Administrative Department of Statistics is responsible
processing, analyzing, and disseminating official information.
for compiling the national accounts statistics; the Ministry of
The MHCP is in charge of the collection and dissemination
Finance and Public Credit is responsible for fiscal figures; and
of fiscal data while the CBC collects and disseminates data
the Central Bank of Colombia compiles balance of payments,
on the financial sector and balance of payments. Data on
monetary, financial, and investment position statistics.
budget execution, debt, fiscal balance, and financing can be
obtained from the MHCP website, and data on monetary
General Overview variables, exchange rates, interest rates, the external sector,
According to the 2006 International Monetary Fund's (IMF) stock markets, and public finance as are posted on the CBC
Report on the Observance of Standards and Codes (ROSC), website.
Data Module, Colombia has been a subscriber to the IMF's
Special Data Dissemination Standard (SDDS) since May 31, Principle: Comprehensive economic
1996. It meets the specifications for coverage, timeliness, and and financial data, disseminated on a
dissemination of advance release calendars, but uses flexibility
options in the release of the production index and the
timely basis.
analytical accounts of the banking system. According to the [Full Compliance]
IMF SDDS website, the confidentiality of individual reporters
According to the IMF's SDDS website, Colombia meets SDDS
is guaranteed. The IMF's 2007 Article IV report (published
requirements for the coverage, periodicity, and timeliness of all
in 2008 and hereafter referred to as the 2008 IMF report),
data categories. However, Colombia uses the flexibility option
stated that the data provided by the authorities are considered
with respect to the timeliness of the production index and
adequate for surveillance purposes. However, the report
the analytical accounts of the banking sector. Notably, the
noted shortcomings in the estimation of gross investment and
periodicity and timeless schemes for certain data exceed those
the consolidation process for fiscal data.
prescribed by the SDDS.
The IMF's SDDS website discloses that the main laws and
regulations governing data dissemination include Decree-Law Principle: Ready and equal access to
No. 3167 of 1968 and Decree No. 2118 of 1992, which official statistics.
authorize the National Administrative Department of Statistics
[Full Compliance]
(DANE) to prepare statistical information in order to fulfill its

www.estandardsforum.org 55

Per the IMF's SDDS website, Colombia meets the
requirements for the advance dissemination of release
calendars and for equal access to information. By and large, the
data are simultaneously disseminated through press releases
and bulletins. Subsequently the information is mainly published
on the DANE, CONFIS, and CBC websites. Further, daily
information on exchange rates and interest rates is available
through telephone answering machines. The publication dates
are mainly available through the magazine of the CBC and the
IMF SDDS website.
Principle: Official statistics must have
the confidence of their users.
Transparency of its practices and
procedures is a key factor.
[Compliance in Progress]
According to the 2008 IMF report, the DANE is responsible
for the compilation of the national accounts data, the CBC
for the financial and external sector statistics, and the MHCP
for information on public revenues, expenditures, and financing.
Concerning real sector statistics, the IMF SDDS website asserts
that Decree-Law No. 3167 and Decree No. 2118 authorize
DANE to prepare statistical information in order to fulfill its
objectives. Regarding fiscal data, there is no single law or formal
arrangement that establishes specific responsibilities for the
different official agencies for preparing fiscal statistics. However,
there are norms that are related to fiscal information. The
Organic Budget Law (Decree No. 111) mandates the CONFIS
to monitor non-financial sector, and Decree No. 85 refers to
the information on domestic and external debt. Furthermore,
the CBC compiles financial and external sector information as
established by Decree No.1633 and Central Bank of Colombia
Law No. 31. According to the IMF SDDS website, the
confidentiality of individual reporters is guaranteed, and access
to data (before their release) is restricted to the government
officials of the reporting entities. Nonetheless, the website
does not provide information regarding internal government
access for the following variables: (1) consumer prices index;
(2) producer prices index; (3) balance of payments; (4)
merchandise trade; and (5) population. In general, data are
published without ministerial commentaries. In addition,
revisions of data are explained to the public. Major changes
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
in methodologies are generally released at the same time
the data is released, with the exception of data concerning
national accounts, producer index, international reserves, and
the exchange rate, whose methodological modifications are
announced in advance. According to the 2008 Arango report,
some commentators have recently reported an increasing loss
of credibility concerning official figures.
Principle: A set of standards that
deals with the coverage, periodicity
and timeliness of data must also
address the quality of statistics.
[Compliance in Progress]
The IMF's SDDS website discloses that Colombia has several
sources that detail information related to the methodologies
used to prepare the statistics. These include the New National
Accounts Base: Data for 1994-1995, the Statistical Bulletin of
the DANE, the Producer Price Index Methodology of the
CBC; the CBC website, and working documents of the DANE.
However, there is no public documentation related to the
methodology of the central government debt data. Other
reports are being prepared detailing the methodology for
monetary and international investment position statistics.
Colombia does not provide summary methodologies on the
IMF's SDDS website for data on exchange rate and interest
rate. Overall, Colombia complies with the standards related to
dissemination of component detail, reconciliations with related
data, and statistical frameworks that support statistical cross-
checking. Nevertheless, there is no systematic balancing of
fiscal data with other macroeconomic figures. Also, central
government borrowing cannot be crosschecked because it is
not published in different reports.
Sources of Assessment
International Monetary Fund, "Colombia: Report on the Observance of
Standards and Codes - Data Module," Country Report No. 06/356,
Washington D.C.: IMF, October 2006. Available from International
Monetary Fund website. Accessed on June 24, 2008. (IMF 2006)
http://www.imf.org/external/pubs/ft/scr/2006/cr06356.pdf
International Monetary Fund's Special Data Dissemination Standard
website. Accessed on June 20, 2008. (IMF SDDS website)
http://dsbb.imf.org/Applications/web/sddscountrycategoryl...
56

Relevant Organizations
Central Bank of Colombia - Banco de la República (CBC)
http://www.banrep.gov.co/index.html
Colombian National Administrative Department of Statistics -
Departamento Administrativo Nacional de Estadistica de Colombia
(DANE) (website in Spanish only)
http://www.dane.gov.co/
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/
Relevant Legislation/Regulation
Decree by which the National Administrative Department of Statistics is
Reorganized No.3167, 1968 - Decreto por medio del cual se reorganiza el
Departamento Administrativo Nacional de Estadística No. 3167, 1968 (in
Spanish only)
http://www.lexbasecolombia.com/lexbase/normas/decretos/19...
Decree by which the National Administrative Department of Statistics is
Restructured No. 2118, 1992 - Decreto por medio del cual se
reestructura el Departamento Administrativo Nacional de Estadística No.
2118, 1992 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Central Bank Law No. 31, 1992 - Ley del Banco de la República No. 31,
1992 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Decree establishing the Public Accounting Office within the Ministry of
Finance and Public Credit and other norms No. 85, 1995 - Decreto por el
cual se organiza la Dirección General de la Contabilidad Pública en el
Ministerio de Hacienda y Crédito Público y se dictan otras disposiciones
No. 85, 1995 (in Spanish only)
http://www.presidencia.gov.co/prensa_new/decretoslinea/19...
Decree No. 1663, 1960 - Decreto No. 1663, 1960
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Supplementary Sources
Arango, M., "Cuentas Serias [Serious Figures],"June 11, 2008. Newspaper
on-line. Available from Portafolio.com.co website. Accessed on July 7,
2008. (Arango 2008)
http://www.portafolio.com.co/opinion/columnistas/otroscol...
Central Bank of Colombia website. Last updated on June 26, 2008.
Accessed on June 26, 2008. (CBC website)
http://www.banrep.gov.co/index.html
International Monetary Fund, "Colombia: 2007 Article IV Consultation -
Staff Report; and Public Information Notice on the Executive Board
Discussion," Country Report No. 08/31, Washington, D.C.: IMF, January
2008. Available from International Monetary Fund website. Accessed on
June 26, 2008. (IMF 2008)
http://www.imf.org/external/pubs/ft/scr/2008/cr0831.pdf
Ministry of Finance and Public Credit website. Accessed on June 26, 2008.
(MHCP website)
http://www.minhacienda.gov.co/MinHacienda/haciendapublica...
http://www.minhacienda.gov.co/MinHacienda/haciendapublica...
http://www.minhacienda.gov.co/MinHacienda/haciendapublica...
National Administrative Department of Statistics website. Last updated on
June 26, 2008. Accessed on June 26, 2008. (DANE website)
http://www.dane.gov.co/index.php?option=com_content&task=...
http://www.dane.gov.co/
Oxford Analytica, "Fiscal Transparency Report - Colombia," Oxford: OA,
December 2006. Available from California Public Employees' Retirement
System website. Accessed on June 8, 2008. (OA 2006a)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
Oxford Analytica, "Monetary Transparency Report - Colombia," Oxford:
OA, December 2006. Available from California Public Employees'
Retirement System website. Accessed on June 9, 2008. (OA 2006b)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
57
 Financial Standards Report Colombia
January 2009

Code of Good Practices on Transparency in Monetary Policy

LEVEL OF COMPLIANCE: COMPLIANCE IN PROGRESS

Summary diverse topics and CBC regulations; the Issuer's Report, which
included information regarding policymaking; and the Inflation
In its 2006 report on Monetary Policy Transparency in
Report, which explains monetary decisions and evaluates
Colombia, Oxford Analytica (OA) stated that Colombia's
prospective risks. In addition, Colombia releases monetary data
overall score of "Compliance in Progress" remains unchanged
following the International Monetary Fund's (IMF) Special Data
from the previous year. The 1991 Constitution sets out the
Dissemination Standards (SDDS). OA reported that there is
independence of the Central Bank of Colombia (CBC),
no formal public consultation mechanism regarding monetary
providing this institution with the authority to implement
policy and financial regulation, but - as of 2006 - the CBC
monetary policy and regulate foreign exchange and financial
has held semiannual seminars that are attended by a wide
markets. In turn, Central Bank Law No. 31 of 1992 details the
variety of analysts and policymakers. The OA report also noted
CBC's functions and specifies its legal framework, while the
progress in other areas, such as advances in the diffusion
CBC's bylaws determine internal procedures. The CBC has a
of information on CBC Board of Directors meetings. The
solid technocracy and a strong reputation for independence.
dates and minutes of the meetings are publicly available on
Its primary objective is price stability and, since 1999, this
the CBC website. However, OA suggested that "additional
has been implemented via an inflation-targeting framework.
information on the monetary policy framework would enhance
A 2005 Constitutional amendment allows the Colombian
transparency" (p.85).
President to run for a second term. This has raised the
possibility that the President could appoint a majority of CBC
The 1991 National Constitution establishes the independence
board members if he or she is elected to a second term, which
of the CBC. According to the Constitution, the CBC's main
could threaten CBC independence. To obviate this possibility,
functions are the implementation of monetary policy, the
Congress is reviewing a draft bill that would change the
regulation of foreign exchange, and the control of the financial
conditions by which board directors are appointed. The CBC
sector. Additionally CBC Law No. 31 of 1992 details the
observes the International Monetary Fund's Special Data
CBC's responsibilities and determines its financial, operational
Dissemination Standard for monetary data and produces a
and technical autonomy. The Constitution also sets the key
comprehensive range of information on monetary policy and
objectives for the CBC, prioritizing inflation control as most
overall macroeconomic conditions. OA also noted that there
important. To operationalize this goal, the CBC has adopted a
have been gradual improvements concerning the public
traditional inflation targeting framework focused on controlling
dissemination of monetary information, but added that more
the evolution of consumer price index in 1999. Annual inflation
steps need to be taken to enhance transparency of monetary
targets and the instruments employed to fulfill these targets
policy.
are published on the CBC website. According to the IMF's
2007 Article IV Consultations report, this framework could
General Overview be strengthened by establishing 18- and 24-month forward-
Oxford Analytica's (OA) 2006 Report on Transparency in looking targets and by providing more frequent communication
Monetary Policy asserted that Colombia has a well-established about the targeted inflation path, beyond immediate calendar
legal framework concerning monetary policy. According to year targets.
OA, several official reports provide information related to
monetary issues, including a weekly newsletter titled Foreign OA noted that the CBC is widely regarded as independent
Exchange and Monetary Statistics; the Monthly Magazine of and professional. The CBC board of directors comprises the
the Central Bank of Colombia (CBC), press releases covering Minister of Finance, five full-time members, and the CBC

www.estandardsforum.org 58

general manager. The CBC general manager is elected by the
other board members. Full-time board members serve a four-
year term that can be renewed twice. In 2005, a Constitutional
amendment was passed that permits the Colombian president
to run for re-election to a second term. This could undermine
the CBC's independence, given that two of the full-time board
members are presidential appointees, named to their posts in
the middle of the presidential term. With the right to run for
re-election, the president could conceivably appoint a total of
four board members, constituting a majority. Commentators
do not generally expect the current president, Mr. Uribe,
to take advantage of this situation, but OA has suggested
that the potential problem should be directly addressed. In
2006, the opposition Liberal Party submitted a bill to Congress
intended to lengthen the terms served by board members,
thus mitigating the potential threat to the CBC's independence
that is implicit in the possibility of a second presidential term.
An opinion piece by Rudolf Hommes disclosed that Congress
started to debate this bill in October 2007 .
Colombia has a free floating exchange rate, although the IMF's
2007 report noted that, in practice, the authorities operate
a managed floating regime. The IMF staff suggested that
Colombia should cease discretionary foreign exchange
intervention and allow more flexibility in order to "allow the
external accounts to adjust rapidly to changes in the
international environment without the buildup of large
imbalances" (p.22). Also, the CBC's 2008 inflation report noted
that, in order to prevent exchange rate appreciation, the
government established capital controls in 2007. The IMF has
recommended that these controls be eliminated, stating that
controls are not effective in the long run and the impact on
the exchange rate is probably small. In addition, such controls
conflict with the government objective of increasing financial
depth.
Principle: Clarity of roles,
responsibilities and objectives of
central banks.
[Compliance in Progress]
The 2006 OA report rated Colombia's compliance with this
principle as "Compliance in Progress." The report remarks
that there is a well established legal framework for monetary
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
policy. The 1991 Constitution of Colombia establishes the
independence of the CBC, its functions for implementing
monetary policy and regulating the financial sector, and its
primary objective of controlling inflation. The CBC Law details
the CBC's responsibilities, and the CBC's bylaws determine
internal procedures . Price stability is the primary objective of
the CBC.
Both the Constitution and the CBC Law require the
coordination of fiscal and monetary operations, according to
OA. Moreover, the harmonization of fiscal and monetary policy
is reviewed each year in the Annual Macroeconomic Plan
released by the National Council for Economic and Social
Policy (CONPES ). According to the CBC website,
coordination is facilitated by the fact that the Minister of
Finance is a CBC board member. Furthermore, since the CBC
Law establishes price stability as the central bank's primary
objective, it would take priority if conflicts between fiscal and
monetary authorities arise . Moreover, OA reported that
Decision C No. 481 of 1999 of the Constitutional Court
establishes that the National Development Plan (NDP) "should
provide a broad scenario for the coordination of fiscal and
monetary policies among different state institutions" (p.79).
The CBC's role as lender to the government is established
under Article No. 373 of the Constitution, which provides that
the CBC can lend to the government only when there is a
unanimous approval by the board. The CBC can carry out
the lender of last resort function for state-owned enterprises.
Article No. 27 of the CBC Law sets out the procedures
governing the allocation of CBC profits, which are allocated to
a reserve fund or transferred to the Treasury .
The CBC enjoys a strong reputation for independence and
professionalism. However, the current rules governing the
appointment of CBC board directors raise concerns about
the institution's independence going forward, given that the
President of Colombia could conceivably appoint a majority
of board members if he or she is elected to two terms in
office. In 2006, the opposition Liberal Party submitted a bill in
Congress that sought to lengthen the terms of the members
of the board, thereby mitigating the potential threat to CBC
independence resulting from a second presidential term. Rudolf
Hommes reported that, as of October 2007, the bill was under
consideration by Congress .
59

Principle: Open process for
formulating and reporting monetary
policy decisions.
[Compliance in Progress]
The 2006 OA report rated Colombia's compliance with this
principle as "Compliance in Progress." Policy making is the
province of the CBC board of directors, whose procedures
for election and removal are established in the CBC Law and
the Colombian Constitution. The seven-member board is led
by the Minister of Finance. The CBC website discloses the
composition of the board and the schedule of its meetings.
Colombia has been implementing an inflation targeting regime
since 1999, focusing on the evolution of the consumer price
index. OA asserted that the CBC has "adopted a two-year
target to better accommodate lags between policy
implementation and the effect on inflation, replacing the earlier
practice of an inflation point target that had been in use since
1992" (p. 81). OA also noted that intervention rules are clear
and that the CBC reports its interventions in the market on
a daily basis . The annual inflation targets of inflation and
the instruments used by the CBC to fulfill those targets are
published on the CBC website.
The CBC's March 2008 Inflation Report explains that inflation
targets are defined by the board of directors for the current
and the upcoming year. The long-run aim of the CBC is to
achieve a 3 percent annual rate of inflation. However, OA
noted that, because Colombia employs a managed float for
its currency, there are doubts about the effectiveness of the
inflation targeting framework. According to the IMF's 2007
Article IV Consultations report, this framework could be
strengthened by establishing 18- and 24-month forward-
looking targets and by providing more frequent communication
on the targeted inflation path, beyond the immediate calendar
year targets . The CBC's 2008 Inflation Report disclosed that,
in 2007, prompted by strong capital inflows, the central bank
intervened in the exchange market in order to prevent the
appreciation of the Colombian peso. This intervention
generated inflationary pressures despite the adoption of
sterilization measures, and led to an increase in the CBC's
policy interest rate that fostered capital inflows, exacerbating
the initial condition that they sought to relieve. Consequently,
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Financial Standards Report Colombia
January 2009
the CBC and the government established capital controls to
discourage capital inflows. According to the IMF's 2007 report,
however, capital controls are not desirable in the long run,
because their impact on the exchange rate is negligible and will
negatively impact the government's aim of increasing financial
depth.
The CBC's main monetary policy instrument is the interest
rate repurchase and reverse repurchase operations, for which
the board of Directors determines a minimum and maximum
rate. Also, the Central Bank intervenes in foreign exchange
markets and sells and purchases bonds aiming to provide
liquidity. According to OA, "there has been a gradual narrowing
of the range of policy rates as the monetary policy strategy has
become clearer. This has contributed to strengthening the link
between the policy rates, the overnight rate and longer term
rates" (p. 81).
The CBC website publishes data on its monetary policy
decisions. It also publishes a variety of reports that include
information on monetary policy, financial and foreign exchange
regulation, and open market operations. These reports include
a weekly newsletter titled Foreign Exchange and Monetary
Statistics; the CBC's Monthly Magazine, which releases articles
referred to several topics and details the regulations that are
issued by the BanRep; the Issuer's Report, which includes
relevant information regarding policymaking; and the quarterly
Inflation Report, which explains monetary decisions and
evaluates future risks . The Inflation Report aims to make board
decisions more transparent, increase public understanding of
monetary policy, and enhance its credibility. Moreover, the
CBC website provides access to the minutes of the board of
directors' monthly meetings, which contain information relative
to the policy measures decided in those events. OA further
stated that the CBC provides Congress with information
regarding the balance of payments, monetary policy, and
coordination between fiscal and monetary policies. According
to OA, "changes in the setting of monetary policy instruments
(other than fine-tuning measures) are publicly announced and
explained in a timely manner " (p. 82).
Principle: Public availability of
information on monetary policy.
[Compliance in Progress]
60

In its 2006 Report on Monetary Policy Transparency in
Colombia, OA rated Colombia's compliance with this principle
as "Compliance in Progress." Colombia's monetary data comply
with the IMF's SDDS, to which Colombia has been a subscriber
since 1996. The OA report further noted that the CBC
publishes its balance sheet in three venues: the CBC's twice-
annual reports to Congress, which include annual and semi-
annual balance sheets; the Bank Review, which includes
monthly balance sheets for the last 24 months; and the CBC
website, which offers six-month updates of the balance sheets.
Furthermore, in the Inflation Report, it provides information on
monetary policy decisions . OA added that the CBC website
is "regularly updated with information, reports, legislation, and
board decisions, as well as economic and financial data" (p. 84).
The website offers English language translations of the Inflation
Reports and the board's report to Congress. However, OA
suggested that "additional information on the monetary policy
framework would enhance transparency" (p. 85).
Principle: Accountability and
assurances of integrity by the central
bank.
[Compliance in Progress]
OA rated Colombia's compliance with this principle as
"Compliance in Progress" in its 2006 report. The Constitution
and the CBC Law establish that the CBC is accountable to
Congress. Also, Articles No. 46 and 48 of the CBC Law
state that the Executive and the Attorney General function as
external controllers of the CBC . In addition, the President
of Colombia appoints a CBC Auditor to audit the financial
statement. The Superintendency of Finance is in charge of
executing the external control and supervision of the CBC.
Since 2002, the CBC has also been subject to monitoring by an
independent external auditor. The CBC's financial statements
are published in March and September on the CBC website
and are subject to the control of the Attorney General,
according to the OA report. The CBC's "Notes of the Financial
Statement" provide information on the audit process and
accounting practices of the CBC .
Articles No. 38-44 of the CBC Law requires CBC personnel
to comply with provisions of the CBC Law and other bylaws
and internal regulations. Also, Law No. 734 of 2002 establishes
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
some provisions regarding staff and official conduct. Moreover,
the CBC has its own code of conduct that addresses issues
such as conflicts of interest and the handling of confidential
data. However, this code is not available to the public.
Furthermore, there is a disciplinary code that sets out
provisions for all public officials, including members of the
CBC. However, according to OA, "legislation does not explicitly
establish the provisions under which BanRep [CBC] board
members can be removed,, except for the general guidelines
established in Article 35" (p. 87).
Sources of Assessment
Oxford Analytica, "Monetary Transparency Report - Colombia," Oxford:
OA, December 2006. Available from California Public Employees'
Retirement System website. Accessed on June 9, 2008. (OA 2006)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
Relevant Organizations
Central Bank of Colombia - Banco de la República (CBC)
http://www.banrep.gov.co/index_eng.html
Council of Economic and Social Policy - Consejo Nacional de Planificación
Económica Social (CONPES) (website in Spanish only)
http://www.conpes.org.ni/
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/
Office of the Attorney General - Procuradoría General de la Nación
(PGN) (website in Spanish only)
http://www.procuraduria.gov.co/
Office of the National Comptroller - Contraloría General de la República
(CGR) (website in Spanish only)
http://www.contraloriagen.gov.co/html/home/home.asp
Relevant Legislation/Regulation
Constitution of the Republic of Colombia, 1991 - Constitución Política de
Colombia, 1991 (amended through 2005) (in Spanish only)
http://pdba.georgetown.edu/Constitutions/Colombia/col91.html
Central Bank Law No. 31, 1992 - Ley del Banco de la República, No. 31,
1992 (in Spanish only)
http://www.banrep.gov.co/junta/l31de1992.pdf
Sentence C No. 481, 1999 - Sentencia C No. 489 de 1999 (in Spanish
only)
http://web.minjusticia.gov.co/jurisprudencia/CorteConstit...
Supplementary Sources
Cano, C. G., "Current State of Colombian Monetary Policy [Estado Actual
de la Política Monetaria Colombiana]," Colombian Cooperatives
61

Confederation Conference, Bogotá, Colombia, May 16, 2008. Available
from Colombian Cooperatives Confederation website. Accessed on June
17, 2008. (Cano 2008)
http://www.portalcooperativo.coop/eventos/2008/credito/me...
Central Bank of Colombia, "Informe sobre Inflación [Inflation Report],"
Bogotá, Colombia: Banco de la Republica, March, 2008. Available from
Central Bank of Colombia website. Accessed on June 11, 2008. (CBC
2008a)
http://www.banrep.gov.co/documentos/publicaciones/inflaci...
Central Bank of Colombia, "Informe de la Junta Directiva al Congreso de la
República [Report of the Board of Directors addressed to the Congress],"
Bogotá, Colombia: Banco de la Republica, March, 2008. Available from
Central Bank of Colombia website. Accessed on June 11, 2008. (CBC
2008b)
http://www.banrep.gov.co/documentos/junta-directiva/infor...
Central Bank of Colombia, "La Historia del Banco [The Bank's History],"
n.d. Available from Central Bank of Colombia website. Accessed on June
11, 2008. (CBC n.d.)
http://www.banrep.gov.co/documentos/el-banco/pdf/historia...
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Central Bank of Colombia website. Last update on January 17, 2008. (CBC
website)
http://www.banrep.gov.co/junta-directiva/calendario_jd.html
http://www.banrep.gov.co/board_directors/bd_calendar.htm
http://www.banrep.gov.co/politica-monetaria/index.html
http://www.banrep.gov.co/monetary_policy/index.html
http://www.banrep.gov.co/el-banco/hs_3.htm
Hommes, R., "Si no está dañado, mejor no arreglarlo [If it's not broken,
don't fix it]," El País, October 8, 2007. Newspaper online. Accessed on
June 12, 2008. (Hommes 2007)
http://www.elpais.com.co/historico/oct082007/OPN/opi1.html
International Monetary Fund, "Colombia: 2007 Article IV Consultation -
Staff Report; Staff Supplement; and Public Information Notice on the
Executive Board Discussion," Country Report No. 08/31, Washington,
D.C.: IMF, January 2008. Available from International Monetary Fund
website. Accessed on May 7, 2008. (IMF 2008)
http://www.imf.org/external/pubs/ft/scr/2008/cr0831.pdf
International Monetary Fund's Special Data Dissemination Standard
website. Accessed on May 7, 2008. (IMF SDDS website)
http://dsbb.imf.org/Applications/web/sddscountrycategoryl...
62
 Financial Standards Report Colombia
January 2009

Code of Good Practices on Transparency in Fiscal Policy

LEVEL OF COMPLIANCE: ENACTED

Summary up the Medium Term Expenditure Framework (MTEF) as a

sub-component of the MTFF. The MTEF includes expenditure
Oxford Analytica's (OA) 2006 Fiscal Transparency Report
projections and targets for the coming four years. The
stated that Colombia has made steady progress in
government plans to integrate the MTFF and the MTEF with
strengthening its fiscal policy framework over the last years.
the National Development Plan (NDP). OA asserted that this
The Fiscal Responsibility Law of July 2003 provides a
integration will increase fiscal transparency significantly. Decree
framework for short- and medium-term fiscal planning. This
No. 4730 sets out measures that were included in the 2005
has led to the improved evaluation of factors that generate
proposed Budget Code reforms that ultimately failed to pass in
expenses across different budgeting periods, and the financial
the Congress. The Decree regulates the request of budgetary
impact of new laws. OA noted that the Medium Term Fiscal
additions, establishing certain requirements for extra funding.
Framework (MTFF) was improved in terms of the availability
As a result, there were no budgetary additions in 2005 and
of information, forecasts, contingent liabilities, tax exemptions,
2006.
and quasi-fiscal expenditures. In addition, a Medium Term
Expenditure Framework (MTEF) was introduced as a sub-
According to a 2007 study by Cárdenas et al, the FRTL requires
component of the MTFF. Consequently, OA rated Colombia's
the MTFF to specify primary fiscal targets for the upcoming
overall score as "Enacted." Still, budget management on the
ten years, and must also set public debt targets. The MTEF
regional and municipal level continues to be a challenge.
details expenditure targets for the coming four years, classified
However, AIn 2005, tTFFproposedDalso TEF,,ureless
by sectors and components (debt, investment, and operational
comprehensive version of the .'sC statedreform of
expenditure). However, the authors point out that the
intergovernmental transfers, approved in 2007, limit the growth
legislation lacks enforcement mechanisms. OA reports that
in transfers from the central government to local and regional
the FRTL may have improved the planning framework but,
governments. This reform attempts to avoid a significant
beyond that, it lacks consistency. OA does note that there has
widening of the central administration's deficit and is meant
been progress in the monitoring of budget execution, however.
to preserve the credibility of fiscal policy. This reform should
Colombia is extending and implementing the Integrated
help reduce the growth in central government expenditures.
Financial Information System (SIIF) at the national level - a
The International Monetary Fund also noted that privatization
process that was nearly completed in 2008. According to the
efforts are moving forward, and the operations of the state-
website of the Ministry of Finance and Public Credit (MHCP),
owned oil company, ECOPETROL, are becoming
the government plans to fully implement the system in 2009.
commercialized now that investment will be financed by the
A reform of the tax code was passed in 2006 through Law
issuance of shares to the private sector. This should reduce the
No. 1111, but the legislation was not as comprehensive as the
central government's overall fiscal risk.
original government proposal. Nonetheless, the International
Monetary Fund (IMF) reported in 2007 that the tax reforms
General Overview have reduced some distortions that existed under the previous
Oxford Analytica's (OA) 2006 Fiscal Transparency Report regime. Furthermore, Legislative Act No. 4 of 2007 instituted
states that Colombia has continued to make steady progress in reforms to the system of transfers from the central
implementing the 2003 Fiscal Responsibility and Transparency government to the local and regional governments. According
Law No. 819 (FRTL). The law establishes a Medium Term Fiscal to the IMF, "the reform of the intergovernmental transfers
Framework (MTFF), which has been produced since 2005. In system will help contain the growth of central government
addition, the government issued Decree No. 4730, which set expenditure" (p.27).

www.estandardsforum.org 63

Writing for the International Budget Project's Open Budget
Initiative, Gory Suarez compiled an Open Budget Index (OBI)
for 2006 that rated Colombia's budget process, overall, at
57%. The OBI tracks the production of seven key budget
documents: the Pre-Budget Statement, the Executive's Budget
Proposal, the Citizens' Budget, In-Year Reports, the Mid-Year
Review, the Year-End Report, and the Auditor's Report.
Colombia produces four of these documents (it does not
produce a Pre-Budget Statement, a Citizens' Budget, or a Mid-
Year Review) and makes all of the documents available to the
public.
The IMF's 2007 report noted that the fiscal balances of the
Non-Financial Public Sector (NFPS) have been positive.
According to the June 2007 MTFF,the NFPS showed
improvement in its fiscal figures. The primary balance moved
from a 1.2% deficit in terms of GDP in 1999 to a 1.4% surplus
on average between 2000 and 2002, and rose again to a 3.5%
surplus on average between 2003 and 2007. The net debt of
the NFPS has been reduced from 47.9% of GDP in 2002 to
31.2% in 2006. IMF staff noted that a stronger fiscal stance
would lead to public debt falling below 30 percent of GDP
by 2011. The staff agreed with the authorities that there was
no distinct single public debt target (as a percentage of GDP)
to anchor fiscal policy, although it noted that various studies
estimate that debt levels greater than 25 percent may prove
vulnerable. In addition, the IMF report noted that privatization
efforts are moving forward, and that operations of the state-
owned oil company - ECOPETROL - are becoming
commercialized. Thus investment will be financed by the
issuance of shares to the private sector. Fiscal risk stemming
from ECOPETROL's operations will thus be reduced, and IMF
staff agreed that, starting in 2008, "ECOPETROL could be
taken out of the fiscal indicators used to measure the fiscal
policy stance, such the overall public sector deficit" (p. 20).
Principle: Clarity of roles and
responsibilities.
[Enacted]
OA's 2006 report rated Colombia's compliance with this
principle as "Enacted." The public sector is composed of the
legislative, executive, and judicial branches, which are all
autonomous. The executive branch comprises the three
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Financial Standards Report Colombia
January 2009
different levels of the government -national government,
departmental governments, and municipalities. The structure
and functions of the government are clearly specified in the
1991 Constitution. The executive branch is responsible for
policy formulation and implementation. The roles and
responsibilities of the government are defined in Law No.
715. The 2003 IMF Report on the Observance of Standards
and Codes (ROSC), stated that the legal and administrative
framework for fiscal management, although well established in
law, remains complex. According to the ROSC, an NDP must
be submitted to Congress at the beginning of the government's
four-year term, which roughly corresponds to the four-year
term served by the legislature. The NDP provides the
framework according to which the annual budget is prepared.
Colombia's 2003 International Budget Report states that the
NDP has a relevant role in the process to elaborate the
General National Budget (GNB), and this approach puts public
investment in a central role for implementing the NDP. The
GNB is divided into a current expenditure budget and an
investment budget. However, the IMF's 2003 ROSC stated
that this system yields "a multiplicity of documents related to
the formulation, presentation, and execution of the budget,
separately prepared by different entities, without a clear
framework of coordination, and a consistency difficult to verify"
(p.14),.
The 2006 OA report found that Colombia has shown
continued progress in clarifying the roles and responsibilities
of the national and sub-national governments. However, a
proposed Organic Law of Territorial Organization has not
yet been passed, and ambiguities in the division of functions
between national and sub-national governments persist. The
website of the Representatives' Chamber of Colombia
discloses that, in February 2008, the central government and
Congress agreed to withdraw the proposed Organic Law of
Territorial Organization in order to reach consensus among
the different levels of government. The legislative and the
executive branches agreed to hold public hearings in order to
consult the opinions of different sub-national entities. In a 2003
paper, Mendoza Morales argued that the current Territorial
Organization Organic Law is incomplete because it excludes
geographic, environmental, and cultural aspects of territorial
organization.
64

The IMF's 2003 ROSC noted that the MHCP prepares the
current expenditure budget. The NDP constitutes the
investment budget. The Fiscal Policy Council (CONFIS) designs
fiscal policy and plays a coordinating role. The process by which
the NDP is formulated is set forth in Articles 345 through
355 of the Constitution, and by the Organic Budget Statute.
The 2006 OA report noted that the government continues
to make steady progress in implementing the FRTL. This Law,
which was approved in July 2003, establishes principles of fiscal
discipline across all levels of government with reference to
public debt, expenditure, and primary surplus and organizes
the budget process at the sub-national level. According to OA,
Colombia has improved the fiscal discipline and transparency.
With the implementation of the FRTL, a MTFF was adopted
as a tool for fiscal planning and evaluation in the short and
medium term. This has yielded improvements in the evaluation
of factors that generate expenses across different budgeting
periods, such as contingent liabilities, and of the financial impact
of new laws. According to the FRTL, municipalities must
produce their own MTFF, providing multi-year projections of
revenues and stating primary fiscal balance targets. OA noted
that progress in this area has been much slower at the
municipal level than it has been at the central government level.
OA also reported that the Colombian government initiated
a plan to pass a Budget Code reform in 2003, but the draft
was rejected by Congress in 2005. However, the government
issued Presidential Decree No. 4730 on December 28, 2005,
which included elements of the rejected reform bill. This
Decree prohibits the request of additional funding unless it
is related to unforeseen expenditure or can be financed by
current revenues. If these conditions are not met, it is necessary
to estimate the impact of additional expenditure. According
to OA, prior to the Decree's passage, budget additions were
sought at least once per year, but in 2005 and 2006 no
such additions were sought. The 2007 report by Cárdenas
et al.stated that this Decree has strengthened fiscal constraint
with the MTFF and its primary balance targets, and introduced
a new budgetary classification which is more transparent and
is in line with international standards. The Decree established
that the national government must develop a MTEF, including
expenditure limits and projections for the following four years,
classified by sectors and components (debt, investment and
operational expenditure. OA reported that some
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Financial Standards Report Colombia
January 2009
commentators feel that the MTFF and MTEF have improved
the planning framework but nonetheless lack consistency, since
they only set indicative targets. OA points out that, after the
implementation of the FRTL, regional and municipal
governments have had fiscal surpluses. Nonetheless, the central
government has had deficits of about 5% of GDP, and this
raises concerns regarding long-term fiscal sustainability.
However, Cardenas et al. argue that it is premature to assess
the effects of the FRTL. Nonetheless, since 2004, the MTFF
has served as a reference for analyzing the evolution of public
finance.
Colombia has various autonomous and independent
institutions which are defined by the Constitution and law.
One of these is the Central Bank of Colombia (CBC), which
is independent. Together with the executive, the CBC
coordinates the design of the overall macroeconomic
framework as part of the Annual Macroeconomic Plan. The
Minister of Finance chairs the CBC board of directors to
reinforce the coordination mechanism, but cannot veto
monetary decisions. The Superintendency of Finance (SF) is
another independent institution created as a result of the
merger between the Superintendency of Banks and Financial
Institutions and the Superintendency of Securities. According
to the OA report, this institution enjoys administrative and
financial independence from the government. As for non-
financial public enterprises, OA notes that the "the relation
between non-financial public enterprises and the government
is clearly defined in law" (p.99). These enterprises are required
to report to the Fiscal Policy Council about their financial
situation and activities.
With respect to government involvement in private sector,
the IMF's 2003 ROSC states that "the public corporate sector
is present in many strategic sectors" (p. 11). Nonetheless, in
some sectors - for instance, electricity, residential utilities, and
telecommunications - it competes on a level-playing field with
private firms. In addition, the government can invest in private
companies. Its shareholdings are disclosed by the General
Accounting Office, although not in great detail. In 2004
Colombia initiated a large scale privatization effort. According
to the OA report, assets to be privatized are estimated at
US$10 billion. The IMF's 2007 Article IV Consultations noted
that privatization efforts are moving forward, and the state-
65

owned oil company ECOPETROL's operations are becoming
commercialized. Thus investment will be financed by the
issuance of shares to the private sector. Fiscal risk stemming
from ECOPETROL's operations will thus be reduced and IMF
staff agreed that, starting in 2008, "ECOPETROL could be
taken out of the fiscal indicators used to measure the fiscal
policy stance, such the overall public sector deficit" (p. 20).
In 2006 the government attempted to reform the tax system,
with the aim of strengthening, simplifying, and unifying it. The
terms of the initial reform proposal underwent significant
changes, however. According to a 2007 report by the Political
Science Institute, the new version of the tax reform bill was
approved by Congress on December 27, 2006. This law
reduced the rates of corporate income tax, modified other
rates, excluded some products from VAT payment liability,
and created the wealth tax. The IMF's 2007 report stated
that "while less comprehensive than the original government
proposal, the 2006 tax reform reduced some of the system's
distortions" (p.27). Ethical standards for public servants are
established by Law No. 90 of 1995. It states that servants
must posses a non-conviction certificate and be under no
disciplinary sanctions. Also, Law No. 734 of 2002 establishes
a disciplinary code. The Office of the Attorney General is in
charge of enforcing the disciplinary code.
Principle: Open budget processes
[Compliance in Progress]
OA's 2006 Report on Fiscal Transparency in Colombia rates
Colombia's compliance with this principle as "Compliance in
Progress". In 2003, the IMF's ROSC noted that there was
no law, regulation, or standard governing the content of the
Presidential Message. Although the Organic Budget Law
establishes that the General National Budget must be
consistent with the four-year National Investment Plan, the
Presidential Message does not detail how the Budget
contributes to accomplishing the objectives of the Plan.
Furthermore, the Comptroller General's report on the
General Budget Account of 1999, stated that the Budget and
the Plan differ substantially. OA notes that fiscal policy
objectives are detailed in the Annual Financial Plan, which is
available on the MHCP website. Also, these objectives are
included into the annual financial macroeconomic plan
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Financial Standards Report Colombia
January 2009
developed by CONPES. This plan is available on the websites
of the National Planning Department and the CBC. The
financial plan is revised in June. The FRTL requires that, when
actual outcomes differ from forecasts, an explanation be
provided in the Report of Fiscal and Macroeconomic Results,
which evaluates whether the objectives established in the
Annual Financial Plan have been met.
The level of fiscal information provided by Colombia appears
satisfactory. The OA report stated that "Colombia provides
broad information for the current, forthcoming and previous
budget years" (p.104). Nonetheless, the Budget includes very
limited information about contingent liabilities and no data
related to quasi-fiscal activities. However, there has been some
improvement in the publication of this type of data as a result
of the implementation of the MTFF, which shows information
referred to quasi-fiscal activities and fiscal forecasts Cardenas
et al. state that fiscal rules related to fiscal surplus and debt
are published in the MTFF. The MTFF also includes different
scenarios for public debt. The IMF's ROSC stated that, by law,
the Presidential Message must include an analysis of public debt
repayment capacity, which at a minimum must contemplate
the evolution of the balance and the ratios of debt to GDP
and debt to exports. The Message must include annual debt
indicators and their evolution over the previous two years. OA
stated that although sub-national governments report some
information to the national government, there is no systematic
monitoring and integration of fiscal information. However, the
Fiscal Support Department is working to provide more
complete, high quality data. Traditionally, the Budget reports
revenue and expenditure information, and data related to
allocations and execution of government transfers.
As for the presentation of the final accounts to the legislative,
the IMF's 2003 report noted that, as stated in the Constitution,
"the government must send to the Congress the Finance
Balance Sheet audited by the Office of the General
Comptroller in the six months after the end of the fiscal year,"
after which "the General Budget and the Treasury Account -
which covers the entities included in the [Budget] - must be
submitted to the Congress by the [Comptroller General] no
later than July 30 of each year" (p.33). Moreover, according
to the law, the Comptroller General must submit a report
reflecting any deviations of each budgetary item from the
66
 Financial Standards Report Colombia
January 2009

amounts originally calculated. In addition, CONFIS produces a monitor investment projects, but it is not yet operational"
final fiscal report in December that contains information on the (p.107).
evolution of the fiscal accounts during the year, including the
consolidated balance, the central government balance, and the Principle: Public availability of
balance of the sub-national governments and state enterprises. information.
The CONFIS website provides information on consolidated
[Enacted]
fiscal results on a quarterly basis.
OA rated Colombia's compliance with this principle as
Regarding the evaluation of results of the budget programs,
"Enacted" in its 2006 Report on Fiscal Transparency in
OA's noted that the government has pursued a more target-
Colombia. Information related to the fiscal situation is
based approach. The central government uses the System
published by different institutions with diverse coverage. As for
of Evaluation of the Results of Public Management (SIGOB)
the information related to the budget, OA asserted that the
to evaluate and monitor the results and impacts of its main
MHCP website releases complete information on the sources
policies, programs, and investment projects. The SIGOB
and uses of the annual budget. Furthermore, data that is
website shows all the targets and the progress made related to
comparable with that of the GNB is published for the
these items. Most targets refer to expenditures, so this system
preceding two fiscal years. A projection for the upcoming ten
enhances budgetary accountability.
fiscal years is available in the MTFF. The National Investment
With regard to the accounting system used by central public Plan, the NDP, and the macroeconomic plan are published by
administration, the IMF's 2003 assessment stated that the SIIF the National Planning Department. The macroeconomic plan
"makes it possible to obtain timely information for evaluating requires prior approval by the National Council of Economic
arrears" (p.29). The Fund noted that the SIIF "registers and and Social Policy (CONPES). The NDP shows the main
incorporates timely and reliable information on the different investment and macroeconomic objectives of the government
stages of the expenditure process (commitment, obligation, and includes an investment plan. In addition, the Annual
and payment), encompasses on a timely basis all externally Financial Plan contains the non-financial public sector balance in
financed transactions, and maintains records of assistance in a modified accrual-based accounting methodology.
kind not associated with cash flows" (p.29). OA noted that
CONFIS, which is part of the MHCP, elaborates and publishes
Colombia was close to completing the extension of the SIIF to
monthly reports covering the central government's
the national level as of December 2006. This was mandated
expenditures, revenues, and financing. According to OA "there
by Presidential Decree No. 4730, and aims at collecting
has been considerable improvement over the last several years
information about the execution of the budget. However, as
in terms of the amount and quality of information presented
of March 2008, the MHCP website disclosed that there are
in the Presidential Message to Congress on the Annual Budget
still entities that have not yet entered the system. The MHCP
Law" (p.102). Reports containing consolidated public sector
planned to conduct a pilot test with these entities during 2008,
information are published by CONFIS and are included in
and fully implement the system in 2009. Lastly, OA noted
the annual closing accounts and the Annual Financial Plan.
that "Colombia is only in the initial stages of developing a
These reports include sub-national governments, the CBC,
performance-based system of monitoring and evaluation" and
the Collateral Fund of Financial Institutions (FOGAFIN), and a
cited a World Bank report that described the budget process
group of state-owned companies. OA stated that "the General
as lacking in the capability for "monitoring and evaluation to
Accounting Office of the Nation produces quarterly
track the use of public resources and to evaluate the
information on the balance sheet of every institution of the
performance of those responsible for implementing it. The
government and every municipality, although it is not entirely
National Planning Department is constructing a Unified Public
easy to understand" (p. 102).
Financial Investment System (SUIFP) designed to evaluate and

www.estandardsforum.org 67

Colombia has been working to improve its municipal and
regional budget systems. Leading this effort is the Fiscal
Support Department (FSD). Data quality provided by sub-
national governments has been enhanced, but disclosure
remains untimely. According to OA, the Office of Territorial
Development has also begun improving its reporting of fiscal
balance of regions and municipalities. According to the 2003
International Budgeting Report, the results of its 2003 survey
on budgetary transparency indicate that Colombia ranks
seventh of the 10 regional economies. The report noted that
these results could indicate a lack of transparency in the
budgetary process. Colombia's macroeconomic information,
budgetary control, and the capacity of the Office of
Comptroller General are more transparent, according to the
report. OA further found that, "as part of its commitment to
the IMF Special Data Dissemination Standard (SDDS), to which
it subscribed in 1996, Colombia publishes data on domestic
and public external debt. The [MHCP] website provides
reports on debt composition and maturity terms" (p.103).
Nonetheless, after a thorough analysis of the methodologies
used by the MHCP, the CBC and the Comptroller General, the
CONFIS has concluded that they differ significantly.
As for the commitment to the timely publication of fiscal
information, OA's report asserted that there is no legal
obligation to disclose information to the public. Instead, the
legal framework only establishes that the Comptroller General
must submit fiscal information to Congress on an annual basis.
However, the IMF's 2003 report disclosed that the Colombian
authorities and public servants acknowledge that the
dissemination of information is important In addition, OA
stated that "although Colombia is committed under the terms
of the IMF SDDS to produce advance release calendars, these
are not available on the national websites. The calendar and
contact information for personnel responsible for posting the
information are, however, available from the IMF SDDS
website" (p.103).
Principle: Independent assurances of
integrity.
[Compliance in Progress]
OA's 2006 Report on Fiscal Transparency rated Colombia's
compliance with this principle as "Compliance in Progress".
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Financial Standards Report Colombia
January 2009
The OA report noted that data produced by the MHCP "are
reliable and meet international standards" (p.109). However,
sub-national government information is not fully reliable,
despite the fact that the MHCP is undertaking a program to
improve upon this information. Overall, the administration has
shown a strong commitment to produce high quality fiscal
data. Law No. 716s passed in 2001, sets up a harmonized
accounting methodology which all levels of government, all
government agencies, and all state-owned enterprises must
use. Law No. 734 of 2002 establishes a unified disciplinary
code to promote accurate accounting practices and the timely
registration of fiscal expenses and revenues. OA's report stated
that "the code also requires public servants to implement
information dissemination and transparency practices set out
by the national government, the Office of the General
Accountant, and the General Comptroller of the Republic
Office. Some commentators indicated that there were
contradictions between some of the statistics of different
government departments" (p.109).
In its 2003 assessment, the IMF pointed out that there are
some complexities in the process by which CONFIS compiles
information. In this regard, OA indicates that a manual for the
preparation and reporting of the budget has been recently
developed by the MHCP. This manual follows the IMF's
statistical methodology - Government Financial Statistics
Manual (GFSM) 2001-, and is currently being used by the
government. However, as indicated by the OA report,
commentators noted that the GFSM standards are used for
international comparisons of statistics, but not for the
elaboration of the budget.
The Comptroller General is responsible for auditing fiscal affairs
of the national government, including decentralized agencies
and state-owned enterprises. Regional and municipal
governments are audited by their respective regional
comptroller offices. The Comptroller General's Office is
required to periodically report to Congress. It releases an
annual fiscal report showing the evolution of the main fiscal
accounts and the fiscal situation of state-owned enterprises
and government agencies. The Comptroller General also
elaborates ad hoc reports that refer to specific government
agencies. According to the 2003 International Budget Report,
the Comptroller General can penalize those entities that it feels
68

have acted contrary to the principles of efficiency, efficacy,
and justice. However, OA cautioned that "there have been
recommendations from some institutions that the technical
capacity of the Office of National Comptroller should be
reinforced and that its political independence should be
guaranteed, so that its recommendations can truly contribute
to tackling corruption" (p.110).
The IMF's 2003 ROSC stated that external control agencies are
themselves controlled by the Auditor General's Office, which
is responsible for supervising the fiscal management of the
Comptroller General's Office and the regional comptrollers'
offices. However, OA cited a World Bank report which stated
that the role of the Auditor General's Office needed to be
clarified in order to avoid overlaps with the Comptroller
General's Office. OA also reported that the National Statistics
Department is in charge of elaborating and publishing national
statistics, but has no legal obligation to produce and release
fiscal information. The entities that are responsible for releasing
this type of information are the Comptroller General's Office
and the General Accounting Office.
Sources of Assessment
International Monetary Fund, "Colombia: Report on the Observance of
Standards and Codes: Fiscal Transparency Module," Country Report No.
03/128, Washington, D.C.: IMF, May 2003. Available from International
Monetary Fund website. Accessed on May 15, 2008. (IMF 2003)
http://www.imf.org/external/pubs/ft/scr/2003/cr03128.pdf
International Monetary Fund's Special Data Dissemination Standard
website. Last updated on May 2, 2008. Accessed on May 5, 2008. (IMF
SDDS Website)
http://dsbb.imf.org/Applications/web/sddscountrycategoryl...
Oxford Analytica, "Fiscal Transparency Report: Colombia," Oxford: OA,
December 2006. Available from California Public Employees' Retirement
System website. Accessed on May 8, 2008. (OA 2006)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
Relevant Organizations
Auditor General's Office - Auditoria General de la Republica (AGR)
http://www.auditoria.gov.co/templates/english_version.asp
Central Bank of Colombia - Banco de la República (CBC)
http://www.banrep.gov.co/index_eng.html
Colombian National Administrative Department of Statistics -
Departamento Administrativo Nacional de Estadística Colombia (DANE)
(website in Spanish only)
http://www.dane.gov.co/
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Financial Standards Report Colombia
January 2009
Fiscal Policy Council - Consejo Superior de Política Fiscal (CONFIS)
(website in Spanish only)
http://www.minhacienda.gov.co/MinHacienda/haciendapublica...
General Accounting Office - Contaduría General de la Nación (CGN)
(website in Spanish only)
http://www.contaduria.gov.co/
Ministry of Finance and Public Credit - Ministerio de Hacienda y Credito
Publico (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/MinHacienda
National Council of Economic and Social Policy - Consejo Nacional de
Política Económica y Social (CONPES) (website in Spanish only)
http://www.dnp.gov.co/PortalWeb/tabid/55/Default.aspx
National Customs and Taxes Office - Direccion de Impuestos y Aduanas
Nacionales (DIAN) (website in Spanish only)
http://www.dian.gov.co/
National Planning Department - Departamento Nacional de Planeación
(DNP) (website in Spanish only)
http://www.dnp.gov.co/PortalWeb/
Office of the Attorney General - Procuraduría General de la Nación
(PGN) (website in Spanish only)
http://www.procuraduria.gov.co/
Office of the National Comptroller - Contraloría General de la República
(CGR)
http://www.contraloriagen.gov.co/html/home/home.asp
Presidency of Colombia - Presidencia de la República (website in Spanish
only)
http://web.presidencia.gov.co/
Representatives Chamber of Colombia - Cámara de Representantes de
Colombia (CRC) (website in Spanish only)
http://www.camara.gov.co/
Superintendency of Finance - Superintendencia Financiera (SF)
http://www.superfinanciera.gov.co/
Relevant Legislation/Regulation
Constitution of the Republic of Colombia, 1991 - Constitución Política de
Colombia, 1991 (amended through 2005) (in Spanish only)
http://pdba.georgetown.edu/Constitutions/Colombia/col91.html
Organic Budget Law No. 38, 1989 - Estatuto Orgánico del Presupuesto
General de la Nacion No. 38, 1989 (in Spanish only)
http://www.dnp.gov.co/archivos/documentos/DDTS_Gestion_Pu...
Fiscal Responsibility and Transparency Law No. 819, 2003 - Ley de
Presupuesto, Responsabilidad y Transparencia Fiscal No. 819, 2003 (in
Spanish only)
http://www.secretariasenado.gov.co/leyes/L0819003.HTM
Government Procurement Law No. 80, 1993 - Ley de Contratación de la
Administración Publica No. 80, 1993 (in Spanish only)
http://www.armada.mil.co/index.php?idcategoria=262#
Tax Reform Law No 1111, 2006 - Ley por la cual se modifica el Estatuto
Tributario de los Impuestos Administrados por la Dirección de Impuestos y
Aduanas Nacionales No.1111, 2006 (in Spanish only)
http://www.parramoreno.com/normas/Ley1111.pdf
69

Legislative Act reforming Articles 356 and 357 of the Constitution No. 4,
2007 - Acto Legislativo por el cual se reforman los Artículos 356 y 357 de
la Constitución Política No.4, 2007 (in Spanish only)
http://www.secretariasenado.gov.co/leyes/ACL04007.HTM
Contingent Liabilities and Public Indebtedness Law No. 448, 1998 - Ley de
Manejo de las Obligaciones Contingentes de las Entidades Estatales y otras
Disposiciones en Materia de Endeudamiento Público No.448, 1998 (in
Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Decree parcially regulating Law No. 448 of 1998, No. 1489, 1999 -
Decreto por el cual se reglamenta parcialmente la Ley 448 de 1998,
No.1489, 1999 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Decree regulating Organic Budgetary Norms No. 4730, 2005 - Decreto
por el cual se reglamentan Normas Orgánicas del Presupuesto No. 4730,
2005 (in Spanish only)
http://www1.minambiente.gov.co/ministerio/presupuesto/doc...
Law on Public Sector Accounting Information, Tax and other norms No.
716, 2001 - Ley para el Saneamiento de la Información Contable en el
Sector Público y se dictan disposiciones en Materia Tributaria y otras
disposiciones No. 716, 2001 (in Spanish only)
http://juriscol.banrep.gov.co:8080/cgi/normas_buscar.pl
Supplementary Sources
Cárdenas, M. et al, "La Economía Política del Proceso Presupuestal: El Caso
de Colombia [Political Economy of the Budgetary Process: The Case of
Colombia]," New York: IADB, January 2007. Available from Inter American
Development Bank website. Accessed on May 10, 2008. (Cárdenas et al
2007)
http://www.iadb.org/res/publications/pubfiles/pubCSI-104_...
International Budget Project, "Índice Latinoamericano de Transparencia
Presupuestaria 2003: Una Comparación entre Diez Países (Colombia)
[Latin-American Index of Budgetary Transparency 2003: A Comparison of
Ten Countries (Colombia)]," Washington: IBP, 2003. Available from
International Budget Project website. Accessed on May 14, 2008. (IBP
2003)
http://www.internationalbudget.org/themes/BudTrans/Report...
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
International Monetary Fund, "Colombia: 2007 Article IV Consultation -
Staff Report; and Public Information Notice on the Executive Board
Discussion," Country Report No. 08/31, Washington, D.C.: IMF, January
2008. Available from International Monetary Fund website. Accessed on
May 7, 2008. (IMF 2008)
http://www.imf.org/external/pubs/ft/scr/2008/cr0831.pdf
Junguito, R., and Ortega, J. R., "Ley de Responsabilidad y Transparencia
Fiscal [Fiscal Responsibility and Transparency Law]," Bogotá: Fedesarrollo,
February 2006. Available from Fedesarrollo website. Accessed on May 10,
2008. (Junguito & Ortega 2006)
http://www.fedesarrollo.org.co/includes/scripts/open.asp?...
Ministry of Finance and Public Credit, "Marco Fiscal de Mediano Plazo
[Medium Term Fiscal Framework]," Bogotá: MHCP, June 2007. Available
from MHCP website. Accessed on May 5, 2008. (MHCP 2007)
http://www.minhacienda.gov.co/portal/page/portal/MinHacie...
Ministry of Finance and Public Credit website. Last updated on February
26, 2008. Accessed on May 15, 2008 (MHCP website)
http://www.minhacienda.gov.co/MinHacienda/haciendapublica...
Mendoza Morales, A., "Ordenamiento Territorial: Oportunidad para
Organizar a Colombia como un Estado Regional [Territorial Organization:
an Opportunity for Organizing Colombia as a Regional State]," 2003,
Available from Geographic Society of Colombia website. Accessed on May
14, 2008. (Mendoza Morales 2003)
http://www.sogeocol.edu.co/documentos/3otc.pdf
Institute for Political Science, "Legislative Activity Balance," Bulletin No. 60,
2007. Available from Institute for Political Science website. Accessed on
May 20, 2008. (IPS 2007)
http://www.icpcolombia.org/archivos/observatorio/boletin_...
Representatives Chamber of Colombia website. Last updated on May 15,
2008. Accessed on May 15, 2008 (CRC website)
http://abc.camara.gov.co/camara/site/artic/20080219/pags/...
Suarez, G. "Open Budget Index 2006: Colombia," 2006. Available from
Open Budget Project website. Accessed on May 20, 2008. (Suarez 2006)
http://www.openbudgetindex.org/CountrySummaryColombia.pdf
70

International Financial Reporting Standards
LEVEL OF COMPLIANCE: INTENT DECLARED
Summary
The World Bank's 2003 assessment of Colombia's accounting
and auditing standards reports that the country's Generally
Accepted Accounting Principles (GAAP), established by
Decree No. 2649 in 1993, are based on International
Accounting Standards (currently International Financial
Reporting Standards, or IFRSs) and the U.S. GAAP. However,
the assessment adds that Colombia's GAAP fail to incorporate
many areas covered by the international standards and have
not been updated since 1993 to reflect developments in either
the IFRSs or the U.S. GAAP. Moreover, the World Bank points
out that there is no concept of general-purpose financial
reporting. Instead, multiple agencies issue separate accounting
rules for the entities falling under their jurisdictions. The World
Bank recommends the full adoption of IFRSs, the establishment
of a High Council to oversee this adoption process, and the
creation of an enforcement body focused on accounting and
auditing standards within these professions. A 2008 article in
Dinero Magazine discloses that, as of March 2008, Colombia's
congress was considering Bill No. 165, submitted in 2007,
which would require all large companies in Colombia to fully
adopt IFRSs by 2010 and which would impose an adoption
deadline for 2012 for full adoption by small and medium
companies.
General Overview
According to the 2003 World Bank Report on the Observance
of Standards and Codes (ROSC) on Accounting and Auditing,
the legal framework for accounting in Colombia is comprised
of several laws and regulations: (1) the Code of Commerce
through Decree No. 410 of 1971, which sets forth general
accounting requirements for commercial enterprises; (2) Law
No. 43 of 1990, which provides the government with the
authority to set accounting standards; and (3) the Colombian
Generally Accepted Accounting Principles (GAAP),
promulgated through Decree No. 2649 of 1993. Law No.
222 of 1995 empowers several entities to issue accounting
regulations for companies under their respective jurisdictions.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Specific accounting standards for banks and listed companies
are issued by their respective supervisors. Until 2005, these
were the Superintendency of Banks (SB) and the
Superintendency of Securities (SV) but, according to the
website of the Columbian Presidency, these two entities were
merged to form the Superintendency of Finance (SF). Banks
use the same accounting standards for reporting to the
regulator and external users. Listed companies are required to
prepare quarterly consolidated financial statements and report
changes in accounting policies. The National Tax and Customs
Office (DIAN) issues accounting regulations for tax purposes,
and these generally are not aligned with the Colombian GAAP.
The World Bank report notes that the Superintendency of
Corporations (SS) reviews the financial statements of all
commercial legal entities. In addition, the SB and the SS
(currently, the SF) supervised banks, insurance companies,
pension funds, and listed companies. However, the "regulators
concentrate more on issuing than on enforcing accounting
standards" (p.8), noted the World Bank report. The report
adds that the regulatory entities are incapable of monitoring
and enforcing the accounting rules they set. Overall, the World
Bank assessment concludes that the legal and regulatory
framework for accounting and auditing is inconsistent, unclear,
and fails to promote high quality financial reporting. Therefore,
the World Bank suggests that Colombia enact new legislation
covering the accounting and auditing professions. It further
recommends the creation of a High Council and a regulatory
body specifically charged with both establishing accounting and
auditing standards and enforcing them.
In 2007, the National Institute of Public Accountants (INCP)
reported that, per provisions of the Colombian Constitution,
only the Congress has the authority to issue Colombian GAAP,
although it can delegate this authority to the executive branch.
The World Bank reported in 2003 that Law No. 43 of 1990
gave the Technical Council for Public Accounting (CTCP) the
authority to develop Colombia's GAAP, which were finally
approved by Decree No. 2649 in 1993 and were applicable
to all enterprises in Colombia. Historically, the Colombian
71

GAAP were modeled on the U.S. GAAP and the International
Accounting Standards. A number of comparisons of
Colombian GAAP and their international counterparts carried
out by the CTCP, the Javeriana Universty, and Nestor Jimenez
reveal that there are differences with respect to international
standards, as stated in the CTCP's report of 2004 entitled
"Analysis of the Implementation of Accounting and Auditing
Standards in Public Interest Companies in Colombia." However,
Dinero Magazine reported in 2008 that, as of March of that
year, the Colombian Congress was analyzing Bill No. 165,
first proposed in 2007, which requires under Article 1 that
all companies in Colombia must adopt International Financial
Reporting Standards (IFRSs). Large firms are required to fully
adopt the standards by 2010, whereas small and medium
enterprises will be required to do so by 2012.
The Central Accounting Board is in charge of regulating the
accounting profession. However, the World Bank found that
this board has insufficient funds to perform its functions
efficiently. The World Bank further found that accountants
were not subject to a Code of Conduct consistent with the
one established by the International Federation of Accountants
(IFAC). The INCP's 2007 report notes that the INCP
promotes the adoption of IFRSs. The INCP is listed as a
member on the IFAC website.
Principle: IFRS 1: First-time
Adoption of International Financial
Reporting Standards (effective 2010)
[No Compliance]
According to the 2008 Múnera report, there are differences
between Colombian GAAP and IFRS 1. The report asserts that
the adoption of this principle would have a relatively important
financial impact, but that implementation would entail a high
degree of difficulty when compared to other standards.
Principle: IFRS 2: Share-based
Payment (effective 2010)
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Principle: IFRS 3: Business
Combinations (effective 2010)
[No Compliance]
The 2004 CTCT and 2008 Múnera reports reveal that there
are differences between Colombian GAAP and IFRS 3. Both
reports note that the adoption of this international standard
will have a significantly high financial impact. In addition, the
CTCP mentions that its adoption would require substantial
modifications to Colombian regulations, especially to the
procedures for valuing acquisitions.
Principle: IFRS 4: Insurance
Contracts (effective 2006)
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: IFRS 5: Non-current Assets
Held for Sale and Discontinued
Operations (effective 2010)
[No Compliance]
According to the 2008 Múnera report, Colombian GAAP
differ from IFRS 5. Implementation would involve an
intermediate level of complexity, and a moderate financial
impact is expected from converging with this IFRS.
Principle: IFRS 6: Exploration for and
Evaluation of Mineral Resources
(effective 2006)
[Insufficient Information]
There is insufficient information publicly available as to
Colombia's compliance with this principle.
Principle: IFRS 7: Financial
Instruments: Disclosures (effective
2009)
[No Compliance]
72

According the 2008 Múnera report, there are differences
between Colombian GAAP and IFRS 7.
Principle: IFRS 8: Operating
Segments (effective 2010)
[No Compliance]
According to the 2003 report by the World Bank and the
Jiménez and Nestor report, the Colombian GAAP do not
establish requirements for accounting for segment reporting.
Jimenez also notes that it is only required that companies reveal
income from their three main clients only if the sum of those
incomes is higher than 50 percent of total revenues, or if
the incomes coming from a single main client is higher than
20 percent of total revenues. Jimenez further notes that the
Superintendency of Public Services requires the presentation of
financial statements, with results classified by service, business,
or activity. However, this requirement is not applied to the
general publication of information.
Principle: IAS 1: Presentation of
Financial Statements (effective 2010)
[No Compliance]
According to the 2008 report by Múnera, there are differences
between the Colombian GAAP and IAS 1. The CTCP report
notes that one of the differences between IAS 1 and the
Colombian standard is related to the "fair presentation"
requirement. Further, the adoption of this standard would
enhance transparency and change the way in which financial
statements are prepared and revised.
Principle: IAS 2: Inventories (effective
2005)
[No Compliance]
According to the 2007 report by Macías Acuña et al and the
2004 CTCP document, the provisions of Decree No. 2649
of 1993 related to inventory valuation are less detailed and
comprehensive than international standards. Furthermore, the
CTCP report mentions that the Colombian approach diverges
from IAS 2 with regard to the recognition of inventory losses
to determine the net realizable value. The 2003 World Bank
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
report also points out that the rules on valuation of inventories
are contradictory. In fact, a review of the financial statements
of 20 listed companies shows that some did not detail the
method used for inventory valuation. The World Bank states
that "the provision for obsolete and slow-moving inventory was
not reported" (p.10).
Principle: IAS 7: Cash Flow
Statements (effective 2010)
[No Compliance]
According to the Jiménez and Nestor report, Guideline No.
8 of the Nation's General Accounting Office (CGN) provides
a methodology for the preparation of cash flow statements
that include many requirements for IAS 7. However, in practice
some provisions are not being followed by Colombian
companies. The CTCP 2004 report mentions that since
Colombian accounting norms have already established that
cash flow statements must provide information according to
operating, investing, and financing activities, implementation of
IAS 7 will not require important modifications to Colombian
accounting norms
Principle: IAS 8: Accounting Policies,
Changes in Accounting Estimates
and Errors (effective 2005)
[No Compliance]
The Múnera report of 2008 notes that there are differences
between Colombian GAAP and IAS 8. Implementation of this
standard involves a relatively low financial impact and
implementation complexity. The 2003 World Bank report
states that although listed companies must inform the
authorities about any change in accounting policies, a review of
a sample of 20 financial statements of Colombian companies
showed that many of them did not release accounting policies
relative to various issues.
Principle: IAS 10: Events after the
Reporting Period (effective 2005)
[Insufficient Information]
73

As per the 2003 report by the World Bank, a review of 20
financial statements of Colombian companies revealed that
most companies did not report information related to events
that occur after the presentation of the balance sheets.
Nonetheless, there is insufficient information publicly available
as to Colombia's compliance with this principle.
Principle: IAS 11: Construction
Contracts (effective 1995)
[No Compliance]
The 2003 report by the World Bank and the Jiménez and
Nestor report state that Colombian GAAP do not establish
specific rules concerning construction contracts.
Principle: IAS 12: Income Taxes
(effective 2001)
[No Compliance]
According to the 2003 report by the World Bank, "Colombian
GAAP provides contradictory approaches to recognizing
deferred taxation" (p.9). Actually, a review of 20 financial
statements of Colombian companies showed that most
financial statements did not include information on deferred
taxes. The 2002 Cardona et al. report, and the 2004 report by
the CTCP also confirm that the Colombian norms related to
deferred taxes are not in concordance with the international
standards, and that the methodology to be used is not defined.
The CTCP 2004 report recommends a gradual adoption of
IAS 12, since its implementation along with other IFRSs could
cause impacts on the sustainability of companies.
Principle: IAS 16: Property, Plant and
Equipment (revised 2009)
[No Compliance]
According to the KPMG report of 2005 and the Múnera
report of 2008, there are differences between Colombian
GAAP and IFRS 16. The accounting treatment for increases
of property, plant and equipment values differs from IFRS.
The 2004 CTCP report remarks that there are differences
concerning the definition of property, plant and equipment,
initial valuation and measurement criteria, subsequent
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
valuations, and the recognition of value losses. The CTCP
asserts that implementation of IAS 16 will not affect the
financial viability of organizations. However, the adoption of
this standard will require modifications to tax legislation.
Principle: IAS 17: Leases (effective
2010)
[No Compliance]
The 2004 CTCP report asserts that there are differences
between IAS 17 and the Tax Statute that regulates the
accounting treatment of leases. In particular, the main
difference is related to the classification of leases as operative
or financial. In this aspect, the CTCP notes that the main
change in the implementation of IAS 17 is that some leasing
contracts currently treated as operative will be considered as
financial.
Principle: IAS 18: Revenue (effective
1995)
[No Compliance]
The 2004 CTCP and 2008 Múnera reports note that there are
differences between IAS 18 and Colombian GAAP. The former
report mentions there are differences concerning the following
aspects: (1) measurement of revenue; (2) sale of goods; and
(3) rendering services. The CTCP is of the opinion that the
adoption of this international standard will not significantly
impact Colombian companies, but it could potentially conflict
the requirements of the Colombian fiscal authorities.
Principle: IAS 19: Employee Benefits
(revised 2009)
[No Compliance]
The 2004 CTCP report mentions that international standards
on employee benefits are far more developed and systematic
than Colombian principles, which are deemed ambiguous. The
2008 Múnera report also identifies differences between the
Colombian requirements and IAS 19, and notes that the
implementation of this standard would entail a high level of
complexity.
74

Principle: IAS 20: Accounting for
Government Grants and Disclosure
of Government Assistance (revised
2009)
[No Compliance]
The Jiménez and Nestor report states that the Colombian
accounting norms do provide guidance on accounting for
government grants and assistance. The report asserts that,
with the exception of some legal definitions that could cause
confusion concerning the scope of government grants, IAS 20
can be adopted or incorporated to Colombian legislation.
Principle: IAS 21: The Effects of
Changes in Foreign Exchange Rates
(effective 2005)
[No Compliance]
According to the 2003 World Bank report, Colombian GAAP
do not include provisions concerning clear-cut accounting rules
and detailed requirements with relation to foreign currency
transaction and conversion. In addition, the analysis of 20
financial statements of different Colombian companies
indicated that several companies did not specify differences on
settlement of monetary items that may arise as a result of
exchange rates variations. According to the 2008 report by
Vasquez Tristancho, Decree No. 4918 and External Circular
No. 64 of the Superintendency of Finance established some
provisions contained in IAS 21. Still, the 2008 Múnera report
notes that the Colombian GAAP differ from the IAS 21, and
that the implementation of these accounting rules is of
intermediate complexity compared with the other standards.
and may have a high financial impact.
Principle: IAS 23: Borrowing Costs
(revised 2009)
[No Compliance]
The 2004 CTCP and 2008 Múnera reports note that there are
differences between IAS 23 and Colombian GAAP. The 2004
CTCP document remarks that IAS 23 uses a broader concept
of borrowing costs than Colombian norms. The report further
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
notes that Colombian norms do not establish clear procedures
for registering borrowing costs, and consequently could cause
inadequate interpretations.
Principle: IAS 24: Related Party
Disclosures (effective 2005)
[Insufficient Information]
According to the KPMG and Felaban report of 2003,
Colombian financial entities must present individual and
consolidated financial statements at the end of the fiscal year,
and "In the individual financial statements, the only information
that is required to be disclosed refers to investments
(ownership) or inter-company transactions or transactions with
affiliates or with related parties" (p.54). The definition of
related parties includes: (1) main shareholders; (2) members
of the board of directors; (3) companies in which the financial
entity has considerable investments; (4) parties with an
economic, management, or financial interest; and (5)
companies in which shareholders or directors have
considerable interest. According to the World Bank report
of 2003, the results of an analysis of 20 financial statements
of different Colombian companies indicate that only few
companies provided in their financial statements complete
information regarding related parties relationships and
transactions, including volumes, amounts, and pricing policies.
However, there is insufficient information publicly available as
to Colombia's compliance with this principle.
Principle: IAS 26: Accounting and
Reporting by Retirement Benefit
Plans (effective 1998)
[No Compliance]
According to the Jiménez and Nestor report, the requirements
for accounting for retirement plans in Colombia are not as
comprehensive as those of the international standard, although
the reporting requirements are basically the same. The 2004
CTCP report remarks that the alignment of Colombian
principles concerning retirement benefit plans with
international standards would not entail important impacts on
financial statements and on the process of registration and
compilation of information. Moreover, the CTCP recommends
75

the implementation of IAS 26 since it would generate benefits
in terms of transparency and will not significantly change
Colombian accounting regulations.
Principle: IAS 27: Consolidated and
Separate Financial Statements
(effective 2010)
[No Compliance]
The 2004 CTCP and 2008 Múnera reports reveal that there
are differences between IAS 27 and Colombian GAAP.
Specifically, there are important differences related to the
obligation of presenting consolidated financial statements,
according to the CTCP. Furthermore, the concepts of
subsidiary, joint control and associated differ between
Colombian GAAP and IAS 27. As indicated by the 2003 report
by the World Bank, the Code of Commerce Decree No. 410
of 1971 and Law No. 222 of 1995 establish that companies
must present consolidated financial statements when they own
more than 50 percent of the capital of other enterprises.
Communication No. 100 of 1995 issued by the SB and
Communication No. 1 of the SS establish the requirements for
preparing consolidated financial statements. However, due to
legislative shortcomings, the banks do not consolidate financial
statements of non-banking companies, the report further
notes.
Principle: IAS 28: Investments in
Associates (revised 2009)
[No Compliance]
The 2004 CTCP and 2008 Múnera reports note that there
are divergences between Colombian GAAP and IAS 28. In
fact, the CTCP remarks that although there are no significant
differences concerning the concept of "significant influence," in
Colombia the definitions of "associated," "subsidiary," and "joint
control" present divergences from international standards.
Further, as stated in the CTCP report, there are divergences
concerning the acquisition of an investment in associates since
in Colombia the differences between the cost of acquisition
and the investor's share in the associate are computed
differently compared to IAS 28. According to the 2003 World
Bank report, the Colombian accounting principles do not
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
establish provisions related to clear-cut accounting and
disclosure concerning investments in associates.
Principle: IAS 29: Financial Reporting
in Hyperinflationary Economies
(revised 2009)
[No Compliance]
The 2002 Cardona et al. report states that, unlike IAS,
Colombian standards do not require firms to adjust financial
statements when inflation occurs. Also, there is no uniformity
in the adjustment of comparative figures, and the cash-flows
statements are not fully adjusted. Moreover, the 2003 report
by the World Bank notes that there are inconsistencies
between the different norms that set out provisions concerning
inflation adjustments. In this respect, the report states that the
Colombian tax accounting rules require accounting treatments
that are not in line with financial reporting rules.
Principle: IAS 31: Interests in Joint
Ventures (revised 2009)
[No Compliance]
According to the 2004 CTCP and 2008 Múnera reports,
Colombian GAAP differ from IAS 31. Also, as noted in the
2003 World Bank report, "Colombian GAAP lacks clear-cut
accounting rules and detailed disclosure requirements in the
area of joint ventures" (p.9). The CTCP also remarks that
the concept of "joint control" established in Colombian norms
differs from that of IAS.
Principle: IAS 32: Financial
Instruments: Disclosure and
Presentation (effective 2010)
[No Compliance]
The 2004 CTCP and 2008 Múnera reports show that
Colombian GAAP differ from the IAS 32. According to the
World Bank 2003 report, Colombian GAAP do not establish
clear-cut accounting and disclosure rules concerning financial
instruments. Moreover, a review of financial statements of
Colombian listed companies showed that there were several
76

companies that did not provide detailed information regarding
recognized and unrecognized financial assets and the
company's exposure to credit risk. Also, there were
shortcomings related to other disclosure requirements for
financial instruments.
Principle: IAS 33: Earnings per Share
(effective 2005)
[No Compliance]
According to the World Bank 2003 report, Colombian GAAP
do not contain clear accounting and disclosure rules for
earnings per share. Furthermore, the results of a review of
the financial statements of some Colombian listed companies
revealed that several enterprises did not publish the
information about their earnings per share
Principle: IAS 34: Interim Financial
Reporting (effective 1999)
[No Compliance]
As detailed by the 2004 CTCP report, the principles
concerning interim reporting are established by: (1) the
Commerce Code Decree No. 410 of 1971; (2) Law No.
222 of 1995, the Colombian GAAP; and (3) other resolutions
and communications issued by regulators. There are several
differences between Colombian legislation and the
international standards, including divergences related to the
classification, information users, cost benefit relation,
estimations, dissemination, comparability, regulators, and stock
market size.
Principle: IAS 36: Impairment of
Assets (revised 2009)
[No Compliance]
Although some of the requirements of IAS 36 are covered
under Colombian GAAP and other rules, there is no standard
that specifically regulates the impairment of assets, according
to the CTCP report of 2004. Also, the report remarks that
the Colombian GAAP do not include the concept of cash-
generating unit for estimating the impairment of certain assets.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
The CTCP notes that impairments are classified as reversible
or irreversible, while the approach in IAS 36 is different.
Principle: IAS 37: Provisions,
Contingent Liabilities and Contingent
Assets (effective 1999)
[No Compliance]
As indicated by the 2003 World Bank report, Colombian
GAAP do not set out rules concerning accounting
transparency and disclosure related to provisions and
contingencies. Moreover, the results of a review of the financial
statements of 20 Colombian listed companies revealed that
most companies did not provide information on contingent
liabilities and provisions. Furthermore, IAS 37 provides a better
conceptual classification regarding provisions than that
provided by Colombian standards, according to the 2004
CTCP report. Although in theory Colombian GAAP and IAS
37 are similar, in practice the international standard is not
complied due to the presence of other fiscal norms. The
CTCP further indicates that in practice there is no adequate
information on contingencies in Colombian financial
statements. The CTCP remarks that the main difficulty of
implementing IAS 37 is related to the computation of the
probabilities of contingent events, since Colombian
organizations do not measure them and do not use them in
their accounts.
Principle: IAS 38: Intangible Assets
(effective 2010)
[No Compliance]
According to the 2002 Cardona et al report, Articles No. 66
and 67 of the Colombian GAAP establish some provisions
related to intangible assets. The 2004 CTCP and the 2008
Múnera reports reveal that there are differences between the
Colombian principles and IAS 38. In this respect, the CTCP
mentions that the main differences are related to: (1) the
use of the concept of fair value; (2) the inclusion of research
and development expenditures; (3) the option of choosing a
revaluation model instead of a cost model as accounting policy;
and (4) the calculation of the amortization of some intangible
assets, including commercial credits.
77

Principle: IAS 39: Financial
Instruments: Recognition and
Measurement (effective 2010)
[No Compliance]
As indicated by the 2003 World Bank report, Colombian
GAAP do not establish clear accounting and disclosure rules in
the area of financial instruments.
Relevant Organizations
Principle: IAS 40: Investment
Property (effective 2009)
[No Compliance]
The CTCP 2004 report notes that Colombia does not have a
specific standard that regulates accounting practices related to
investment property.
Principle: IAS 41: Agriculture
(effective 2009)
[No Compliance]
According to the report by Jiménez and Nestor and the 2004
CTCP report, Colombia has no specific requirements for
accounting for agriculture. In fact, the Jiménez and Nestor
report notes that agricultural assets sometimes are treated as
inventories and in other cases are registered as expenditures.
In this sense, the CTCP further remarks that the adoption of
IAS 41 would entail considerable consequences for company
valuation.
Relevant Legislation/Regulation
Sources of Assessment
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, including Reports on the Observance of Standards
and Codes on the topics: Securities Regulation, Insolvency and Creditor
Rights Systems, and Payment Systems," IMF Country Report No. 05/287
Revised, Washington, D.C.: IMF, August 2005. Available from International
Monetary Fund website. Accessed on May 6, 2008. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
Múnera, J. E., "Lecciones Aprendidas en la Implementación de las IFRS en
Colombia [Lessons Learned in the Implementation of IFRS in Colombia],"
April 2008. Available from NIC-NIIF website. Accessed on June 30, 2008.
(Múnera 2008)
http://www.nicniif.org/foro2008/memorias/Lecciones_aprend...
Technical Council of Public Accounting, "Análisis de la Implementación de
Estándares de Contabilidad y Auditoría en Empresas de Interés Público en
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Colombia [Analysis of the Implementation of Accounting and Auditing
Standards in Public Interest Companies in Colombia]," November 2004.
Available from Central University Foundation website. Accessed on August
20, 2008. (CTCP 2004)
http://www.ucentral.edu.co/pregrado/cienciaseconomicas/co...
World Bank, "Colombia: Report on the Observance of Standards and
Codes - Accounting and Auditing," July 2003. Available from World Bank
website. Accessed on July 1, 2008. (World Bank 2003)
http://www.worldbank.org/ifa/rosc_aa_col.pdf
Central Board of Accountants - Junta Central de Contadores (JCCONTA)
(website in Spanish only)
http://www.jccconta.gov.co/
Ministry of Finance and Public Credit - Ministerio de Hacienda y Crédito
Público (MHCP) (website in Spanish only)
http://www.minhacienda.gov.co/
National Institute of Public Accountants - Instituto Nacional de Contadores
Públicos (INCP) (website in Spanish only)
http://www.incp.org.co
National Tax and Customs Office - Dirección de Impuestos y Aduanas
Nacionales (DIAN ) (website in Spanish only)
http://www.dian.gov.co/
Superintendency of Corporations - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?MIval=s...
Superintendency of Finance - Superintendencia Financiera (SF) (website in
Spanish only)
http://www.superfinanciera.gov.co
Superintendency of Public Services - Superintendencia de Servicios
Públicos Domiciliarios (SSPD) (website in Spanish only)
http://www.superservicios.gov.co/siteSSPD/index.jsp
Technical Council for Public Accounting - Consejo Técnico de la
Contaduría Pública (CTCP) (website in Spanish only)
http://www.jccconta.gov.co/consejot/news.php
Colombian Political Constitution, 1991 (with amendments through 2005) -
Consititución Política de Colombia, 1991 (con reformas al 2005) (in
Spanish only)
http://www.georgetown.edu/LatAmerPolitical/Constitutions/...
Law adding Law No. 145 of 1960 regulating the public accounting
profession and other provisions No. 43, 1990 - Ley por la cual se adiciona
la ley 145 de 1960, reglamentaria de la profesión de contador público y se
dictan otras disposiciones No. 43, 1990 (in Spanish only)
http://actualicese.com/normatividad/2001/leyes/L43-90/1L4...
Law by which Book II of the Code of Commerce is modified, a new
bankruptcy proceedings regime is issued and other provisions are
established No. 222, 1995 - Ley por la cual se modifica el libro II del
Código de Comercio, se expide un nuevo régimen de procesos
concursales y se dictan otras disposiciones No. 222, 1995 (in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?MIval=s...
78

Presidential Decree by which accounting is regulated in general and the
Colombian General Accounting Principles are issued No. 2649, 1993 -
Decreto Presidencial por el cual se reglamenta la contabilidad en general y
se expiden los principios o normas de contabilidad generalmente
aceptados en Colombia No. 2649, 1993 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Code of Commerce Decree No. 410, 1971 (last amended 1999) - Codigo
de Comercio Decreto No. 410, 1971 (última enmienda 1999) (in Spanish
only)
http://www.microfinancegateway.com/files/24806_file_law_C...
Decree by which the National Tax and Customs Office issues the Tax
Statute No. 624, 1989 (last amended 2007) - Decreto por el cual se
expide el Estatuto Tributario de los Impuestos Administrados por la
Dirección General de Impuestos Nacionales No. 624, 1989 (última
enmienda 2007) (in Spanish only)
http://www.secretariasenado.gov.co/leyes/ET.HTM
Decree adding a paragragh to articles No. 69 and 102, respectively, from
Decree No. 2649 of 1993, No. 4918, 2007 - Decreto por el cual se
adiciona un parágrafo a los artículos 69 y 102, respectivamente, ambos del
Decreto 2649 de 1993 No. 4918, 2007 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Draft Law by which Colombia adopts International Financial Reporting
Standards for the preparation of finacial statements No. 165, 2007-
Proyecto de Ley por la cual el Estado colombiano adopta las Normas
Internacionales de Información Financiera para la presentación de informes
contables No. 165, 2007 (in Spanish only)
http://www.actualicese.com/normatividad/2007/10/24/proyec...
Superintendency of Banks External Circular No. 100, 1995 - Circular
Externa de la Superintendencia Bancaria No. 100, 1995
Superintendency of Banks External Circular No. 67, 2001 - Circular
Externa de la Superintendencia Bancaria No. 67, 2001
Supplementary Sources
Dinero Magazine, "Hacia una Contabilidad Global [Towards Global
Accounting]," March 28, 2008. Available from Dinero Magazine website.
Accessed on June 5, 2008. (Dinero Magazine 2008)
http://www.dinero.com/wf_InfoArticulo.aspx?IdArt=46084
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
International Federation of Accountants website. Accessed on July 3, 2008.
(IFAC website)
http://www.ifac.org/About/MemberDetails.tmpl?MemID=65484845
Jiménez N. A., "Análisis de los Estándares Internacionales de Contabilidad y
las Normas Contables Colombianas [Analysis of the International
Accounting Standards and the Colombian Accounting Principles]," AGN
International, n.d, Available from Adecum website. Accessed on June 30,
2008. (Jiménez n.d.)
http://www.adecum.org/internacional/comparativos/agn.doc
KPMG, "La información Financiera se Internacionalizó! [The Financial
Information was Internationalized!]," January - July 2005. Available from
KPMG website. Accessed on July 3, 2008. (KPMG 2005)
http://www.kpmg.com.co/publicaciones/bol_n&r/n&r05/bol_ne...
KPMG and Felaban, "Accounting Practices adopted by Financial Institutions
in Latin America," 2002. Available from KPMG website. Accessed on July 4,
2008. (KPMG & FELABAN 2002)
http://us.kpmg.com/microsite/FSLibraryDotCom/Docs/felaban...
Macías Acuña, M. C. et al., "Comparativo entre la NIC 2 'Existencias' y el
Decreto No. 2649 de 1993 [Comparative Analysis between IAS 2
'Inventories' and Decree No. 2649 of 1993]," 2007. Available from
Adecum website. Accessed on July 1, 2008. (Macías Acuña et al. 2008)
http://www.adecum.org/globalconta/trabajos/inventarios_ue...
National Institute of Public Accountants, "Response to the IFAC Part 2,
SMO Self-Assessment Questionnaire," Self-assessment prepared as a part
of the International Federation of Accountants' Member Body Compliance
Program, March 2007. Available from International Federation of
Accountants website. Accessed on July 4, 2008. (INCP 2007)
http://www.ifac.org/ComplianceAssessment/part_2_survey/CO...
Presidency of Colombia website. Last updated on August 20, 2008.
Accessed on August 20, 2008. (Presidency website)
http://www.presidencia.gov.co/sne/2005/junio/23/04232005.htm
http://www.presidencia.gov.co/sne/2005/noviembre/28/04282...
Vasquez Tristancho, G., "Magia Financiera con inversiones en el Exterior
[Financial Magic with Investments Abroad]," January 2008. Available from
Instituto Nacional de Contadores Públicos de Colombia website. Accessed
on June 30, 2008. (Vasquez Tristancho 2008)
http://incp.org.co/Site/2008/Documentos/GVT/CEF/magia.pdf
79

International Standards on Auditing
LEVEL OF COMPLIANCE: INTENT DECLARED
Summary
In its 2003 assessment of accounting and auditing practices
in Colombia, the World Bank commended the Colombian
authorities for initiating a number of reforms aimed at
implementing international best practices in Colombia,
including the reform of corporate financial reporting
framework. The World Bank noted, however, that there is no
legal requirement for external audit in Colombia, no auditing
standards, and no concept of independent audit. It therefore
recommended that Colombia fully adopt International
Standards on Auditing (ISAs), establish a Higher Council
responsible for the adoption of ISAs, promulgate a new law
to improve auditing requirements and regulate the functions of
the auditor, and create a body for enforcing auditing standards
and regulating audit profession. In a 2005 report, the
International Monetary Fund observed that Colombia still did
not comply with international best practices in the area of
auditing. It, too, recommended adopting ISAs. According to a
2007 publication by the Superintendency of Companies and
the Ministry of Commerce, Industry and Tourism, the
Colombian Congress passed Law No. 1116 in 2006. Article
122 of this Law requires the government to review accounting
and auditing standards in order to align them with international
standards.
General Overview
In 2003, the World Bank conducted a review of accounting
and auditing practices in Colombia in order to evaluate their
weaknesses and strengths, compare the reporting
requirements with actual practices, and provide
recommendations to improve actual compliance. International
Financial Reporting Standards and International Standards on
Auditing (ISAs) were used as the benchmarks for assessing
national standards. Overall, the World Bank commended the
country's authorities for initiating a number of reforms aimed
at implementing international best practices in Colombia,
including the reform of the financial reporting framework.
However, it recommended that several additional measures be
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
implemented: (1) establish a Higher Council with the function
of adoption of accounting and auditing standards; (2) issue a
new law to improve auditing norms and regulate the functions
of the auditor; (3) create a body for enforcing auditing
standards; and (4) develop the auditing profession by improving
the licensing process, providing training programs on ISAs, and
creating a professional organization for independent auditors.
According to the World Bank report, under the Code of
Commerce and Law No. 43 of 1990, the following types of
companies must appoint an auditor to conduct an annual audit:
(1) registered corporations; (2) branches of foreign companies;
(3) companies in which the owners that have at least 20
percent equity do not take part in management; and (4)
commercial entities with total assets exceeding a certain
threshold. In addition, Article 20 of Law No. 45 of 1990
stipulates that all entities under the supervision of the
Superintendent of Banking and the Superintendent of
Securities (which agencies were later merged to form the
Superintendency of Finance) must appoint an auditor.
However, the functions of the auditor differ from those of an
independent auditor, because they also include controllership
functions which should be carried out by the management.
Moreover, Law No. 43 requires the auditor to conduct its
audits in accordance with the generally accepted auditing
standards (GAAS), which are not further specified. Overall,
the World Bank concluded that, in Colombia, "the legislative
requirements on auditing contradict the modern concept of
financial statements audits. In fact, there is no external financial
statements audit requirement in Colombia" (p.1). A 2004
publication by the Technical Council for Public Accounting
(CTCP) also observes that the Colombian auditing model is
contradictory because it combines administrative, operational,
and auditing responsibilities.
Realizing the need to improve the corporate financial reporting
framework, the Colombian authorities, at the time of the
World Bank report, proposed a new law that would adopt
international accounting and auditing standards and reform the
80

auditing profession. A 2007 publication by the Superintendency
of Companies and the Ministry of Commerce, Industry and
Tourism notes that Article 122 of Law No. 1116, passed by
the Congress in 2006 states that the government must review
its auditing standards in order to align them with international
standards. A 2007 editorial by R.M. Castro asserted that the
government planned to propose legislative reforms of the
auditing practice for consideration by Congress.
According to the World Bank report, there is no statutory
body to regulate the audit profession. The National Institute
of Public Accountants (INCP) is a national professional
organization, but it does not have the mandate to monitor
compliance of its members with auditing standards and ethics
rules. In fact, the review of selected audited financial statements
performed by the World Bank as a part of its 2003 assessment
revealed that Colombian auditors generally did not comply
with the existing requirements. According to the International
Federation of Accountants (IFAC) website, the INCP is a
member of IFAC.
Principle: ISA 200 Overall Objectives
of the Independent Auditor and the
Conduct of an Audit in Accordance
with International Standards on
Auditing (effective 2009)
[Insufficient Information]
There is insufficient information publicly available that directly
addresses this principle.
Principle: ISA 210 Agreeing the
Terms of Audit Engagements
(effective 2009)
[Insufficient Information]
A 2004 report by the CTCP recommended full adoption of
ISA 210. However, the CTCP noted that the functions of
the auditor cannot be curtailed since they are established by
law. The CTCP added that this modification would not be
desirable since it would affect public confidence. No further
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
information as to Colombia's compliance with this principle is
publicly available.
Principle: ISA 220 Quality Control
for an Audit of Financial Statements
(effective 2009)
[Insufficient Information]
In a 2004 report, the CTCP recommended full adoption of ISA
220 for all firms and professionals that have the responsibility
of issuing audit reports. The CTCP further suggests that, in
the short run, Colombia should control internal and external
quality of auditing firms. No further information as to
Colombia's compliance with this principle is publicly available.
Principle: ISA 230 Audit
Documentation (effective 2009)
[Insufficient Information]
The CTCP's 2004 report recommended full adoption of ISA
230 but also mentioned the importance of retaining provisions
of Law No. 43 concerning the obligation of storing audit
documentation for at least 5 years. No further information
as to Colombia's compliance with this principle is publicly
available.
Principle: ISA 240 The Auditor’s
Responsibilities Relating to Fraud in
an Audit of Financial Statements
(effective 2009)
[Insufficient Information]
According to the CTCP's 2004 report, Article 207 of the
Code of Commerce establishes that the auditor must report
any irregularity in the functioning of companies. However, this
provision cannot be fulfilled in practice since it requires the
auditor to know all operations of the company. The report
states that the Commerce Code should be modified in order
to incorporate the requirements of ISA 240. The 2003 World
Bank report noted that many external audit reports that were
surveyed did not comply with ISAs since they "lack... proper
81
 Financial Standards Report Colombia
January 2009

focus on fraud and error" (p.12). No further information as to Assessing the Risks of Material
Colombia's compliance with this principle is publicly available. Misstatement (effective 2009)
[Insufficient Information]
Principle: ISA 250 Consideration of
Laws and Regulations in an Audit of There is insufficient information publicly available that directly
Financial Statements (effective 2009) addresses this principle.
[Insufficient Information]
Principle: ISA 320 Materiality in
In 2004, the CTCP recommended implementation of ISA 250. Planning and Performing an Audit
In order to comply with the requirements of ISA 250, (effective 2009)
Colombia should introduce modifications to the Code of
[Insufficient Information]
Commerce, particularly, in some provisions on the functions
of the auditor so as to guarantee her or his independence.
In 2004, the CTCP recommended full implementation of ISA
No further information as to Colombia's compliance with this
320. No further information as to Colombia's compliance with
principle is publicly available.
this principle is publicly available.

Principle: ISA 260 Communications Principle: ISA 330 The Auditor’s

of Audit Matters with Those Charged Procedures in Response to Assessed
With Governance (effective 2009) Risks (effective 2009)
[Insufficient Information]
[Insufficient Information]
In 2004, the CTCP recommended full implementation of ISA
In 2004, the CTCP recommended full implementation of ISA
260. However, the adoption of this standard should take into
330. No further information as to Colombia's compliance with
consideration the requirements included in the Code of
this principle is publicly available.
Commerce. No further information as to Colombia's
compliance with this principle is publicly available.
Principle: ISA 402 Audit
Principle: ISA 300 Planning an Audit Considerations Relating to an Entity
of Financial Statements (effective Using a Service Organization
2009) (effective 2009)
[Insufficient Information]
[Insufficient Information]
In 2004, the CTCP recommended full implementation of ISA
The 2003 World Bank report asserted that many Colombian
402. No further information as to Colombia's compliance with
external audit reports that were surveyed did not comply with
this principle is publicly available.
ISAs because they exhibited weaknesses regarding the planning
of audit procedures. In 2004, the CTCP recommended full
implementation of ISA 300. No further information as to Principle: ISA 500 Audit Evidence
Colombia's compliance with this principle is publicly available. (effective 2009)
[Insufficient Information]
Principle: ISA 315 Understanding the
Entity and Its Environment and

www.estandardsforum.org 82
 Financial Standards Report Colombia
January 2009

In 2004, the CTCP recommended full implementation of ISA
500. No further information as to Colombia's compliance with
this principle is publicly available.
Principle: ISA 501 Audit
Evidence—Specific Considerations
for Selected Items (effective 2009)
[Insufficient Information]
In 2004, the CTCP recommended full implementation of ISA
501. No further information as to Colombia's compliance with
this principle is publicly available.
The CTCP recommended full implementation of ISA 530 in its
2004 report. The report noted that the Code of Commerce
should be modified in order to limit the functions of the
auditor. Further, the Code does not clearly establish that the
auditor's task is based on controls of samples. No further
information as to Colombia's compliance with this principle is
publicly available.
Principle: ISA 540 Audit of
Accounting Estimates (effective
2009)
[Insufficient Information]

Principle: ISA 505 External In 2004, the CTCP recommended full implementation of ISA
Confirmations (effective 2009) 540. No further information as to Colombia's compliance with
this principle is publicly available.
[Insufficient Information]

In 2004, the CTCP recommended full implementation of ISA Principle: ISA 550 Related Parties
505. No further information as to Colombia's compliance with (effective 2009)
this principle is publicly available. [Insufficient Information]

Principle: ISA 510 Initial Audit According to the 2003 World Bank report, many external
Engagements—Opening Balances audit reports that were surveyed did not comply with ISAs.
They exhibited shortcomings concerning the auditing of
(effective 2009) related-parties transactions. In 2004, the CTCP recommended
[Insufficient Information] full implementation of ISA 550. No further information as to
Colombia's compliance with this principle is publicly available.
In 2004, the CTCP recommended full implementation of ISA
510. No further information as to Colombia's compliance with
this principle is publicly available.
Principle: ISA 560 Subsequent Events
(effective 2009)
Principle: ISA 520 Analytical [Insufficient Information]
Procedures (effective 2009) The CTCP recommended in its 2004 report that Colombia
[Insufficient Information] adopt ISA 560. No further information as to Colombia's
compliance with this principle is publicly available.
The CTCP in its 2004 report recommended full
implementation of ISA 520. No further information as to
Colombia's compliance with this principle is publicly available.
Principle: ISA 570 Going Concern
(effective 2009)
Principle: ISA 530 Audit Sampling [Insufficient Information]
(effective 2009)
[Insufficient Information]

www.estandardsforum.org 83
 Financial Standards Report Colombia
January 2009

The CTCP recommended in its 2004 document that Colombia Principle: ISA 700 Forming an
adopt ISA 570. No further information as to Colombia's Opinion and Reporting on Financial
compliance with this principle is publicly available.
Statements (effective 2009)
Principle: ISA 580 Written [Insufficient Information]

Representations (effective 2009) There is insufficient information publicly available that directly
[Insufficient Information] addresses this principle.

The CTCP's 2004 report asserted that Colombia should Principle: ISA 705 Modifications to
implement ISA 580. The report noted that Law No. 222
requires the managers of the company to certify the financial
the Opinion in the Independent
statements that are audited by the auditor. However, the Auditor’s Report (effective 2009)
CTCP added that, in line with the requirements of ISA 580, [Insufficient Information]
some cases require specific, written representations. No
further information as to Colombia's compliance with this There is insufficient information publicly available that directly
principle is publicly available. addresses this principle.

Principle: ISA 600 Special Principle: ISA 710 Comparative

Considerations—Audits of Group Information—Corresponding Figures
Financial Statements (Including the and Comparative Financial
Work of Component Auditors) Statements (effective 2009)
(effective 2009) [Insufficient Information]
[Insufficient Information]
There is insufficient information publicly available that directly
addresses this principle.
There is insufficient information publicly available that directly
addresses this principle.
Principle: ISA 720 The Auditor’s
Principle: ISA 610 Using the Work of Responsibilities Relating to Other
Internal Auditors (effective 2009) Information in Documents
[Insufficient Information] Containing Audited Financial
Statements (effective 2009)
There is insufficient information publicly available that directly
[Insufficient Information]
addresses this principle.
There is insufficient information publicly available that directly
Principle: ISA 620 Using the Work of addresses this principle.
an Auditor’s Expert (effective 2009)
[Insufficient Information]

There is insufficient information publicly available that directly

addresses this principle.

www.estandardsforum.org 84

Principle: ISA 800 Special
Considerations—Audits of Financial
Statements Prepared in Accordance
with Special Purpose Frameworks
(effective 2009)
[Insufficient Information]
There is insufficient information publicly available that directly
addresses this principle.
Sources of Assessment
National Institute of Public Accountants, "Response to the IFAC Part 2,
SMO Self-Assessment Questionnaire," Self-assessment prepared as a part
of the International Federation of Accountants' Member Body Compliance
Program, March 2007. Available from International Federation of
Accountants website. Accessed on July 4, 2008. (INCP 2007)
http://www.ifac.org/ComplianceAssessment/part_2_survey/CO...
International Monetary Fund, "Colombia: Financial System Stability
Assessment Update, Including Reports on the Observance of Standards
and Codes on the Following Topics: Securities Regulation, Insolvency and
Creditor Rights Systems, and Payment Systems," IMF Country Report No.
05/287 Revised, Washington, D.C.: IMF, August 2005. Available from the
International Monetary Fund website. Accessed on July 29, 2008. (IMF
2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr05287.pdf
Technical Council of Public Accounting, "Análisis de la Implementación de
Estándares de Contabilidad y Auditoría en Empresas de Interés Público en
Colombia [Analysis of the Implementation of Accounting and Auditing
Standards in Public Interest Companies in Colombia]," November 2004.
Available from Central University Foundation website. Accessed on August
20, 2008. (CTCP 2004) (in Spanish only)
http://www.ucentral.edu.co/pregrado/cienciaseconomicas/co...
World Bank, "Colombia: Report on the Observance of Standards and
Codes - Accounting and Auditing," 2003. Available from World Bank
website. Accessed on July 1, 2008. (World Bank 2003)
http://www.worldbank.org/ifa/rosc_aa_col.pdf
Relevant Organizations
Ministry of Commerce, Industry and Tourism - Ministerio de Comercio,
Industria y Turismo (MCIT) (website in Spanish only)
http://www.mincomercio.gov.co/eContent/home.asp
National Institute of Public Accountants - Instituto Nacional de Contadores
Públicos de Colombia (INCP) (website in Spanish only)
http://www.incp.org.co
Superintendency of Companies - Superintendencia de Sociedades (SS)
(website in Spanish only)
http://www.supersociedades.gov.co/ss/drvisapi.dll?
Superintendency of Finance - Superintendencia Financiera (SF) (website in
Spanish only)
http://www.superfinanciera.gov.co
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
Technical Council for Public Accounting - Consejo Técnico de la
Contaduría Pública (CTCP) (website in Spanish only)
http://www.jccconta.gov.co/consejot/news.php
Relevant Legislation/Regulation
Code of Commerce Decree No. 410, 1971 (last amended 1999) - Código
de Comercio Decreto No. 410, 1971 (última enmienda 1999) (in Spanish
only)
http://www.microfinancegateway.com/files/24806_file_law_C...
Law adding Law No. 145 of 1960 regulating the public accounting
profession and other provisions No. 43, 1990 - Ley por la cual se adiciona
la ley 145 de 1960, reglamentaria de la profesión de contador público y se
dictan otras disposiciones No. 43, 1990 (in Spanish only)
http://actualicese.com/normatividad/2001/leyes/L43-90/1L4...
Law by which Norms Concerning Financial Intermediation Are Issued,
Insurance Activity Is Regulated, Some Faculties Are Conceded and Other
Dispositions Are Approved No. 45, 1990 - Ley por la cual se expiden
normas en materia de intermediación financiera, se regula la actividad
aseguradora, se conceden unas facultades y se dictan otras disposiciones
No. 45, 1990 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Law establishing the Corporate Insolvency Regime in the Republic of
Colombia and other dispositions are issued No. 1116, 2006 - Ley por la
cual se establece el Régimen de Insolvencia Empresarial en la República de
Colombia y se dictan otras disposiciones No. 1116, 2006 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
http://www.elabedul.net/San_Alejo/Leyes/Leyes_2006/ley_11...
Securities Market Law No. 964, 2005 - Ley del Mercado Público de
Valores No. 964, 2005 (in Spanish only)
http://juriscol.banrep.gov.co:8080/CICPROD/BASIS/infjuric...
Supplementary Sources
Actualicese, Informacion Contable y Tributaria al Dia, "La Ley 1116 de
2006 faculta al Gobierno para futura aplicacion de las NIC [Law 1116 of
2006 authorizes the Government for future aplication of NIC]," June 3,
2007. Available from Actualicese website. Accessed on July 28, 2008.
(Actualicese 2007)
http://www.actualicese.com/actualidad/2007/06/03/la-ley-1...
Baker and McKenzie, "Doing Business in Colombia," Bogotá: Raisbeck, Lara,
Rodríguez & Rueda, 2005. Available from Baker and McKenzie website.
Accessed on July 31, 2008. (Baker & McKenzie 2005)
http://www.bakernet.com/NR/rdonlyres/3B938B40-D216-4C22-A...
Castro V., R. M., "Hacia Estándares Internacionales [Toward International
Standards]," National Institute of Public Accountants, 2007. Available from
National Institute of Public Accountants website. Accessed on July 28,
2008. (Castro 2007)
http://incp.org.co/index.php?option=com_content&task=view...
International Federation of Accountants website. Accessed on July 3, 2008.
(IFAC website)
http://www.ifac.org/About/MemberBodies.tmpl
Oxford Analytica, "Shareholder and Creditor Rights in key Emerging
Markets 2006," Oxford: Oxford Analytica, January 2007. Available from
California Public Employee Retirement System website. Accessed on June
85

2, 2008. (OA 2007)
http://www.calpers.ca.gov/eip-docs/investments/assets/equ...
Superintendency of Companies and Ministry of Commerce, Industry and
Tourism, "Cartilla: Nuevo Régimen de Insolvencia Empresarial, Ley 1116 de
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
2006 [Chart: New Corporate Insolvency Regime, Law 1116 of 2006],"
Superintendence of Companies, 2007. Available from Legislación y
Jurisprudencia website. Accessed on July 23, 2008. (SC&MCIT 2007)
http://www.legislacionyjurisprudencia.com/temas/2007/Cart...
86

Methodology Note
For a more thorough discussion of our methodology, please
visit our website. Below you find an explanation of qualifying
criteria for information used in eStandardsForum's standard
reports as well as a definition of the Levels of Compliance.
Sources
Sources used in this report are information that is objective
and freely available to the public that pertain to a country's
compliance with the requirements of any given standard. The
defining characteristics of eStandardsForum's sources are
public availability and objectivity. For example, third-party
assessments of a country will take precedence over
selfassessments. Nevertheless, in the absence of third-party
assessments, self-assessments form an important source of
information.
Levels of Compliance
The compliance categories assess information on two levels.
On the first level, it measures the public availability of
information on a country's compliance with the 12 Key
Standards. If the level of information is unsatisfactory, a rating of
"Insufficient Information" is assigned. If the level of information
is deemed sufficient, a rating ranging from "No Compliance"
to "Full Compliance" is assigned, depending on how well the
publicly available sources have evaluated the country's
regulatory framework for the respective standard. These
particular categories have been selected because they mirror
the process a country follows when implementing standards
and codes.
www.estandardsforum.org
Financial Standards Report Colombia
January 2009
FULL COMPLIANCE: There is publicly available
information indicating that the country has incorporated the
principles of the relevant standard into laws or regulations, and
that these principles are currently being applied and followed
in an effective, consistent, and transparent manner.
COMPLIANCE IN PROGRESS: There is publicly available
information indicating that the country has incorporated the
principles of the relevant standard into laws or regulations and
that there has been significant progress made towards the
effective enforcement of the laws or regulations by regulators
and supervisors, albeit with minor shortcomings.
ENACTED: There is publicly available information indicating
that the country has incorporated most of the principles of
the relevant standard into laws or regulations. The Enacted
category does not address the actual enforcement of the laws
or regulations.
INTENT DECLARED: The country has made a formal,
public, and authoritative declaration that it will incorporate the
principles of the relevant standard into laws or regulations and
will adhere to the standard.
NO COMPLIANCE: There is publicly available information
indicating that the country has not incorporated the principles
of the relevant standard into laws or regulations or has taken
any steps to comply with the relevant standard.
INSUFFICIENT INFORMATION: There is not enough
information publicly available to make an assessment as to the
country's level of compliance with the relevant standard.
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