OBG talks to Gerardo Hernández Correa, Superintendent, Financial Superintendence of Colombia

Interview: Gerardo Hernández Correa

In the wake of the 2008 financial crisis, what factors supported the country’s financial resilience?

GERARDO HERNÁNDEZ CORREA: Our management of macroeconomic policies has historically been very successful. Colombia has been resilient to financial crises thanks to good administration of key elements such as public debt and inflation, which has led to adequate fiscal balance. The government applied countercyclical measures to reduce the effects of the crisis, including raising interest rates when the economy was showing a positive dynamic.

Even so, the country did suffer. Now economic growth has slowed, the central bank has lowered interest rates. The World Bank together with the IMF analysed the Colombian financial sector in 2012 through stress tests on hypothetical extreme scenarios, and financial institutions continued to respond remarkably well even in those cases. Both the reliability of the financial sector and the high solvency standards followed by Colombian institutions are noteworthy. While our regulation maintains solvency requirement levels of 9%, standards will be reinforced through the introduction of a basic solvency requirement (which will be 4.5 %) and the inclusion of capital quality requirements. These regulatory reinforcements will take effect in August 2013.

What is the likely banking penetration rate for 2013?

HERNÁNDEZ: In 2012 Colombia experienced real progress, due mostly to a large expansion of bank services, which were strengthened by the development of early-stage mobile banking platforms. These two channels have proven successful and have contributed to the 17% growth of microcredit. We have grown from having 19,930 businesses serving as local bank branches to 32,028 in one year. The government now subsidises the use of electronic means of payment, and banks such as Davivienda, Grupo Aval, Bancolombia and Citi have introduced these initiatives. More recently, a banking institution won a public tender that will seek to leverage all that capital in mobile banking, which should have a good impact on penetration levels. As a result of these efforts, financial inclusion has risen dramatically – 66.5% of Colombians now have access to at least one financial product (as of September 2012).

The country must ensure financial products are contributing to the economic development of its people, so banks need to work on products adapted to the needs of each individual. The banking sector is concentrated primarily in the hands of domestic companies.

Global operators lost ground following the 2008 crisis, partly due to their operations in affected areas.

To what extent have free trade agreements affected the size of the financial sector, and how will the market share of global players change in 2013?

HERNÁNDEZ: Few countries have witnessed the entry of as many foreign institutions as Colombia has done in the past year. The entries of Chilean Corpbanca, Canadian Scotiabank (in 2010) and Brazilian Itaú to the banking sector, and the Banco de Crédito de Perú and BTG Pactual on the capital markets sector, show that opportunities exist for foreign entities.

Meanwhile, local banks face their next challenge – to become regional players. For now, Bancolombia, Banco de Bogotá and Davivienda, together with Grupo Sura on the insurance side, are making key moves and showing a special interest in Central America.

How would you qualify Colombia’s current pension system in terms of coverage and distribution?

HERNÁNDEZ: The dual nature of the pension system – where public and private funds coexist – produces difficulties for people to understand the system. Discussions are under way to carry out a pension reform that would standardise the system and contribute to increased coverage through rationalisation of the benefits. However, the performance of fund managers in Colombia is appropriate. The sale of BBVA’s pension fund has left two strengthened leaders, Porvenir and Protección, while Skandia is making a considerable effort to achieve prominence in the distribution of pensions.