Bogota DC, December 4, 2020

Looking ahead and

preparing for a post-covid
world

Jorge Castaño Gutiérrez

Financial Superintendent of Colombia

CMF’s Conference on Development and Financial Stability

Discussion Panel "Financial Stability in times of change"
There is clearly no room for complacency, but regulatory reforms have helped
to cushion a shock of a magnitude never seen before
Main lessons learnt from this crisis
Striking a balance between procyclicality and risk
Prudential regulation matters revelation
1 We did not see a recurrence of the problems faced during the GFC.
7 IFRS9 could trigger a sharp increase in Loan Loss reserves when a
recession hits  Countercyclical buffers are deemed to be necessary.

Avoid a one-size-fits-all approach

2 Design response strategies recognizing the local context. Heuristic approach for stress testing
8 “Black swan” events (large, unforeseen, random) are likely to occur.

Adaptative/Pragmatic response
3 To adapt quickly to the dynamic nature of crisis situations as
they develop. Supervision can be carried out remotely
9 The crisis has redefined the supervisory toolkit and what constitutes
meaningful supervisory activities.
Strengthening operational resilience
4 To mitigate cyber incidents, technological failures, natural
disasters or pandemics.
Change catalyst
10 COVID-19 is likely to accelerate many of the trends which were
The power of data already under way before the crisis.
5 Traditional indicators are no longer informative.

Ensure consumers are treated fairly Institutional framework

6 Effective market conduct supervision to maintain transparency 11 Integrated supervision and increased cross-border coordination
and value proposition. to avoid “turf wars”, underlap and overlap.
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The SFC has leveraged from its institutional framework to maximize the synergies
needed to enhance our supervisory capacity during exogenous shocks
Risk-Based Supervision. 2016
Decree 184
International standards
(BCBS, IOSCO, IAIS, FSB, IOPS,
The SFC’s
FATF). structure was
modified
Financial Stability,
Consumer Protection,
Market Integrity.
Joint work across
oversight functions.
2005
Extensive use of Risk-
Based Supervision.
Comprehensive knowledge
of significant activities.
Identifying the risk profile
of each institution and
their inherent risks.
Introduced a High-level
division focused on
consumer protection.
Decree 2399
To enhance supervisory
capacity
Analytics and Research.
Integration
Fintech, Hub, Sandbox,
Green Finance.
Resolution group.
Strengthening consumer
Facilitates decision- Allows to account for
protection (market
conduct supervision). making process and the existing spillovers
coordination to undertake and contagion risks.
preventive actions.
2019
Law 1870 of 2017
came into force
Expanded the scope Provides a Reduces costs by
of Supervision to comprehensive view of leveraging from
Financial the financial system and economies of scale.
Conglomerates (13). its risks.
Avoids underlap
Allows to prevent crises
and facilitate crisis and overlap.
management.
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We will likely need to show the same agility in devising a response that meets the
demands of the new normal while building on the lessons learnt from this episode
Designing the new normal

Strengthen prudential Promoting Fostering Meaningful Leveling the

parameters avoiding effective Embracing
financial supervision - playing field
procyclicality coordination innovation
inclusion Proportionality
(Same activities
same rules)

Digital Information as value Behavioral and Access to New Climate and

Transformation proposition Flexible Models Funding Sources Social Risks

• 100% digital financial
products and services.
• Open banking.
• More efficient payment
systems.
• Greater digital coverage.
• Analytics. • To model customer’s • Alternative financing • Stress test.
• AI. responses under (crowdfunding). • Risk management.
• BigData. increased uncertainty. • Capital markets not only • Promote sustainable
• Digital ethics - privacy for big corporations but finance.
and data ownership. also for SMEs.

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