Following the release of a law that intends for more strict regulation of Colombia’s conglomerates, US-based Moody’s Rating Agency noted a strong step forward for Colombia’s finance industry, according to local media reports.
Colombia’s Ministry of Finance, headed by Mauricio Cardenas, has created legal framework that sets stronger controls on Colombia’s financial sector, which is dominated by a series of large, sprawling institutions. The banking giants have recently begun to expand abroad.
The Ministry of Finance was unavailable for immediate comment with Colombia Reports.
But reports say that the Ministry’s Director of Financial Regulation, David Salamanca, released the details of the new Conglomerate Law on the 4th of August of this year. The Conglomerate Law adds deeper transparency and reporting controls. That is good in the eyes of Moody’s, reported Business News Americas following the release, since Colombia’s financial sector is dominated by cross-party ownership.
That makes the regulatory field complex. Three of Colombia’s largest holdings companies, Grupo Aval and Grupo Sura and Grupo Bolivar own 53% of ownership in the financial sector, reported Business News Americas. But the three groups own 13 subsidiaries that sell lending products in the market.
One man, Luis Carlos Sarmiento, the owner and President of Grupo Aval, owns stakes in four of Colombia’s most important banks. His single holdings company also has ownership in Colombian real estate and telecommunications. In 2013, Forbes listed the billionaire Sarmiento as Colombia’s most wealthy person. He is the 64th most wealthy on Forbes’ list.
How the banking sector is regulated fell under fierce scrutiny by the Santos government after InterBolsa S.A., Colombia’s largest brokerage firm, suddenly collapsed in November of 2012 due to sudden liquidity problems. When the company failed, the government had very little view into some branches of the sprawling company.
Salamanca hopes that after the Conglomerate law, it will.
Moody’s Rating Agency defines the quality of companies and countries when it comes to their ability to meet debt obligations. In July, the firm moved its rating on Colombia’s government bonds to positive. Now the Colombian financial sector will have to show that it, too, is trustworthy. Another InterBolsa shock will only scare away the investors Colombia has tried desperately to win over in this last decade.
Sources
- Moody’s ve con buenos ojos el proyecto de ley que regula los conglomerados (La Republica)
- Supervision de holdings financieros Colombianos aumentara transparencia (BN Americas)
- Luis Carlos Sarmiento Profile (Forbes)
- Moodys changes outlook on Colombia’s government bond rating to positive (Moodys)
