OBG talks to Carlos Raúl Yepes Jiménez, President, Bancolombia

Interview: Carlos Raúl Yepes Jiménez

How much room is there for new foreign players to participate in the financial market?

CARLOS RAUL YEPES JIMENEZ: Colombian banks have been dominant locally because consumers have relied on the banks’ conservatism and use of best practices. Indeed, the success of local investors is due to their intelligent management and knowledge of economic particularities. The conditions are ripe for foreign investors. Brazilian BTG Pactual, Canadian Scotiabank, Chilean Corpbanca and Peruvian BCP are already present. As the country improves its risk profile, more players will come.

How much room is there for new foreign players to participate in the financial market?

YEPES : Colombia has oriented its foreign policy recently to consolidate FTAs with its major trading partners. This allows for greater mobility of capital and increased trade relations with these countries. Colombian banks face the challenge of further internationalising their portfolio of financial products and services. The process of economic liberalisation means tighter competition within the financial system. This is evidenced by the entry of new international players to the domestic market and the expansion of Colombian banks to various Latin American countries to gain greater geographical coverage and build a larger customer base.

How will banking penetration increase in 2013?

YEPES: Non-banking correspondent units were created to provide financial services to the unbanked population. The average percentage of transactions carried out on a monthly basis by non-bank correspondents is 2%, which is expected to grow at a constant pace. Individuals and small business owners can gain access to formal credit, as opposed to more expensive, informal credit lines found outside the banking sector. By September 2012, 66% of the Colombian population had been included in the financial system; the national objective is to reach 68% by 2014. Private institutions cannot achieve penetration targets alone. Joint actions by municipalities, chambers of commerce, private enterprises, national government, educational institutions, compensation funds and other stakeholders are vital.

Are consumers sufficiently informed about all the financial products on the market?

YEPES: Financial education is a guiding principle of the Colombian legal system. Act 1328 (2009) requires entities to properly inform consumers about their products and services, the nature of the markets in which they operate and the different mechanisms clients can use to defend their rights. Moreover, consumers have the right to request adequate information on any service or product, as well as the associated costs. Institutions are supervised and required to develop campaigns to educate their customers on such matters. Each controlled entity must implement education programmes according to the products it offers, which are not limited to savings and simple credit, but also include instruments such as student loans, mortgage loans, seed capital programmes and investment funds.

To what extent has the capital market become a trustworthy source of financing?

YEPES: While we envision sustained economic growth in the coming years, the structural reforms required by the country factor largely in the capital market’s development. We are seeing more companies undertaking projects with large financing needs accompanied by initiatives that encourage them to seek resources in the capital market. This includes promoting good corporate governance, reporting practices, and international accounting standards, with the aim of adopting the International Financial Reporting Standard by 2015.

The institution of new standards will promote transparency and the possibility for debt and equity investors to allocate resources to companies with financing needs. The Colombian government is also conducting business democratisation initiatives, which allow corporations to access all kinds of investors.