In national and world economic history, commercial banking has been and is the basis of the financial system, on which a fundamental activity is developed for the operation and evolution of all productive and commercial sectors.
Since the end of the 19th century, banking establishments have been the main protagonists in national life, fulfilling an essential task for saving, investing and financing, in favor of the personal, family, business and community growth of the nation. According to the stages and characteristics of the Colombian economy, banking has had different circumstances, but always in constant evolution, sometimes under the total administration of the state and, in others, with a predominance of national, international and mixed private capital.
The institutional financial system in the country was generally identified, until not many years ago, with commercial banking, but with phenomena such as industrialization, then protectionist models and recently with the opening and internationalization, the deepening and diversification of the market was registered with the emergence and rapid development of other entities, but the bank maintained its leadership, although now with new strategies that go beyond traditional intermediation.
BACKGROUND
Before the creation of the current Banco de la República, there were several unsuccessful attempts to create an organization that would act as a Central Bank. In 1847 the creation of the Banco de Nueva Granada was proposed, but such a project was never started due to the capital required for its creation, ten million reais. Later in 1855 the "organic law of issue, discount and deposit banks" was issued, but there was no creation of any bank. Then in 1864 it was thought to give the right to issue banknotes to English citizens, so that they could create a national bank, but such citizens did not accept due to the clauses of the contract. In 1866 the government was authorized to establish the Bank of the United States of Colombia, with characteristics of a bank of issue and a state banker,but it was not carried out due to other problems faced by Colombians at the time. The most successful attempt was the creation of the National Bank. In 1880 Rafael Núñez promoted the creation of this bank, and whose banknotes had to be accepted by all private banks, but the National Bank could refuse to receive banknotes issued by private banks if at any time their financial situation was compromised. As such, private banks refused to accept such conditions.but the National Bank could refuse to receive banknotes issued by private banks if at any time its financial situation was compromised. As such, private banks refused to accept such conditions.but the National Bank could refuse to receive banknotes issued by private banks if at any time its financial situation was compromised. As such, private banks refused to accept such conditions.
The emergence of the Banco de la República occurred in 1923. It was organized by the so-called Kemmerer mission. Along with the creation of the Bank, the Banking Superintendency was developed as a surveillance entity.
The first world war brought serious economic and financial difficulties to Colombia that did not improve with the arrival of peace. At the time money was issued without control, each bank faced its liquidity needs due to the lack of a formal system of guarantees and government support. This disorder in financial matters unleashed in the crisis of 1922 that evidenced a shortage of circulating resources and the need to give stability to the currency and credit. Seeing the problem, Congress passed several laws and authorized the government to hire a mission of foreign experts to advise the country on the organization of the monetary and banking structure. In March 1923 a mission arrived, chaired by Edwin Kemmerer, which led to the ordering of the financial system by studying our economy.The result of this mission was the establishment of the Banco de la República based on Law 25 of 1923. 2The Banco de la República exercises central banking functions. It is organized as a legal person under public law, with administrative, patrimonial and technical autonomy, subject to its own legal regime. The basic functions of the Bank are those of regulating currency, international exchange and credit; issue legal currency; administer international reserves, be a lender of last resort and a banker for credit institutions; and serve as the government's fiscal agent. All of them are exercised in coordination with economic policy in general.It is organized as a legal person under public law, with administrative, patrimonial and technical autonomy, subject to its own legal regime. The basic functions of the Bank are those of regulating currency, international exchange and credit; issue legal currency; administer international reserves, be a lender of last resort and a banker for credit institutions; and serve as the government's fiscal agent. All of them are exercised in coordination with economic policy in general.It is organized as a legal person under public law, with administrative, patrimonial and technical autonomy, subject to its own legal regime. The basic functions of the Bank are those of regulating currency, international exchange and credit; issue legal currency; administer international reserves, be a lender of last resort and a banker for credit institutions; and serve as the government's fiscal agent. All of them are exercised in coordination with economic policy in general.be a lender of last resort and a banker for credit institutions; and serve as the government's fiscal agent. All of them are exercised in coordination with economic policy in general.be a lender of last resort and a banker for credit institutions; and serve as the government's fiscal agent. All of them are exercised in coordination with economic policy in general.
The board of directors of Banco de la República is the monetary, exchange and credit authority, which is currently made up of
| Mauricio Cárdenas, Minister of
Finance and Public Credit Juan José Echavarría, Manager general Juan Pablo Zárate, Co-Director |
Adolfo Meisel, Co-Director Ana Fernanda Maiguashca, Co-director Gerardo Hernández, Co-director José Antonio Ocampo, Co-director |
FEATURES
In every Financial System there must be at least three fundamental elements that make it up.
Institutions that carry out the activity.
The means of payment that these institutions transfer.
The markets where these transactions take place.
Financial institutions are created based on the need that society has for them. Initially these did not exist, until the complication of economic activity required the specialization of companies that carried out these functions.
The means of payment are the oldest financial element. The most important of all, money, was born in the 4th century BC in Lydia, and it quickly spread to all the Mediterranean countries. At present, financial institutions normally issue the means of payment necessary to carry out their activity, read checks, stubs, bills, etc., which in turn have to be supported by other means of payment existing in the economic system.
Financial markets are the "place" where financial transactions take place. Until a few years ago, financial operations were carried out in establishments dedicated to these activities, such as the stock market or the futures markets. At present, given the extension of financial activity and the globalization of operations, the aforementioned "place" can be considered to be the whole world.
Summarizing the integral elements of the financial system are:
- Financial assets. Financial intermediaries. The financial markets.
Financial assets are intangible assets with a certain exchange value, which does not depend on their physical characteristics, and which give us the right to certain future benefits.
Financial intermediaries are of special importance, since they channel the savings generated by certain economic agents to others who need it, adapting the terms and amounts to their preferences.
The markets are born from the need to carry out these exchanges, which will have a cost and a need for analysis of the different operations carried out there.
Every Financial System has to meet three fundamental characteristics:
- The Financial System must be a transmitter of Deposits from the units with surplus to the units with deficit. In every Financial System there is an element of risk, both for investors and for those who accept that investment. It is present in every Financial System profitability.
The simple fact that it is necessary to transfer resources from units with a surplus to those with a deficit implies a risk, since the operation may not obtain the desired result and the corresponding losses may occur. This possibility is both for the one who makes the investment and for the one who borrows any amount.
The presence of profitability is necessary for the operation of the Financial System since a non-existent or scarce resource is being demanded and introduced, any resource that keeps these characteristics will always have a price.
STRUCTURE OF THE FINANCIAL SECTOR
BASIC STRUCTURE OF THE COLOMBIAN BANKING MARKET
Financial deepening in Colombia is low when compared to similar countries. For example, it can be seen that the supply of domestic credit provided by the banking sector as a percentage of GDP is less than 50%. In addition to the above, in recent years the costs of using the financial system, in addition to being higher than in other countries, have been on a clear increase, which could present itself as a barrier to access for families.
Additionally, the trend is not only upward, but comparatively, Colombia has very expensive financial services, in fact the most expensive in the region in terms of savings account management fees, credit card and ATM withdrawal. Bankarization in Colombia has been developing very slowly, through consumption and not precisely through savings, despite the latter being the basis of a healthy process of this type. It is stated that Low banking is one of the many impediments to the development of some Latin American countries, this situation is attributed to causes such as the tax environment of the banking sector with the 4 x 1000 tax, the usury rate and of course the cost of financial services, which has gained the most strength among a large number of analystseconomic authorities and, of course, the Colombian population.
IMPORTANCE
The relevance of the Financial System is shown, in the first instance, in the "classical" conception of it, considering it as a vital and integral part of the Economic Circuit, which is one in which different private and public economic agents that produce goods interact. and services in the economy, with those who consume them.
The Financial System is made up of a set of institutions that have the purpose of channeling the surplus (savings) generated by the different economic agents, to channel them towards the units that have a deficit or demand for resources (for consumption and investment), all of this through through the financial market.
Thus, the financial system is the mechanism through which the generators of production (real circuit) interact with the financing providers (users of the financial system), through the products and services available in the financial market.
As an integral part of the economic circuit, the Financial System contributes to the production of a country through its own generation of intermediation products and services; as well as the funds that economic agents need to carry out their productive projects, implying that the Financial System provides efficient intermediaries between Savings and Investment of an economy as well as flows of resources that energize and develop the productive sectors.
On the other hand, through financial markets, transaction costs are reduced, which include search and information costs. The former represent explicit costs such as the expense of advertising the intention to buy or sell a financial asset, and implicit costs, such as the value of the time used to find a counterparty. Information costs are associated with the appreciation of the merits of investing in a financial asset, that is, the amount and probability of the cash flow that is expected to be generated. Financial systems provide information on the different financial assets, their characteristics and risk profile, thus reducing uncertainty. In an efficient market, prices reflect the information added and collected by market participants.
In addition, the importance of the financial system can also be illustrated with the three motivations for the demand for money - asset holding or wealth - of the economic agents, because the entities of the financial system can efficiently satisfy these motivations through the different products and services that they offer to the Market. The motivations for the demand for money are the following:
- Reason for transaction: Each subject needs to meet their payments, and therefore the public needs to maintain cash balances for the purchase of goods or services. Caution Reason: Subjects also need to demand money to face any unforeseen payment as a personal contingency -a family level-, or operational - business level-. Reason for speculation: It is based on some products that are generally traded on the stock market through the purchase and sale of securities.
Finally, it is remarkable not only the economic and financial functions that have been pointed out, but also, as part of the economic circuit, its relevance and connection with the stability and economic health of a country: a stable, solvent and developing Financial System It contributes to the economic and financial stability of a country. Hence the great importance of the financial sector as an engine and lubricant that generates stability in the economy.
POLICIES
REFORMS:
Apart from the reforms that the Banco de la República has undergone, which have been key to the development of the national economy, reforms have been presented to the financial system. The most representative are:
- A specialized banking system was adopted, where three types of entities stood out, commercial banking; agricultural and industrial banking; and mortgage banking. CAVs are developed to favor credit for massive construction projects. In turn, it begins with the UPAC program, so that the money of savers and credits remain constant. This year the commercial financing companies are created.
1990-1993. Law 45 of 90, Law 35 of 93. Financial reforms are generated to guarantee the stability of the sector. This due to the uncertainties experienced in the 80's.
- Law 510 of 1999, through which the organic statute of the financial sector is modified. The government intends to guarantee the stability and normal functioning of the system as a whole.
PRESENT
According to the report of the Financial Superintendency; financial system assets maintain the growth rate, reaching a value of $ 1,456.2 trillion at the end of March 2017, corresponding to a real annual growth of 6.3% 1. In absolute terms, assets presented a monthly increase of $ 17.97 trillion, as a result of the increase of $ 13.5 trillion in investments, $ 2.1 trillion in the loan portfolio and $ 2.4 trillion in other assets (mainly cash and money market operations). The results of the investments of the entities of the financial system were higher than the previous month. In the month, the investment and derivatives portfolio registered an increase of $ 13.5 billion mainly due to the higher balance in treasury bonds (TES) that presented a monthly increase of $ 5.5 billion, supported by the increase of these titles by the trust companies.
DISTRIBUTION OF SECTOR ASSETS (See PDF)
BALANCE OF THE MAIN ACCOUNTS OF THE COLOMBIAN FINANCIAL SYSTEM (See PDF)
CONTRIBUTION OF THE FINANCIAL SECURITY TO GDP (See PDF)
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GDP BY DEPARTMENT IN THE CARIBBEAN REGION (See PDF)
In the remainder of the year and for much of 2017, financial institutions will focus their efforts on analyzing the impact of the preparation and implementation of regulatory and legal variations, such as the tax reform, External Circular Project, cooling of the economy in an environment of low oil prices, inflation and increased risk perception by rating agencies.
BIBLIOGRAPHY
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