Colombia
Colombia[COP]
...
Institutional setup of monetary policy decisions and operations
| Policy decision body, size and composition | The board of directors is composed by 5 board members, the Minister of Finance and the Governor of the Central Bank |
|---|---|
| Major mandates 1 | To keep inflation low and stable and to achieve the highest sustainable level of output and employment. In doing so, monetary policy fulfills the constitutional mandate to maintain the purchasing power of the Colombian peso. |
| Decision-making process | Majority |
| Frequency / length of meetings | Monthly |
| Frequency of announcements | 8 times a year the Board of Directors make a decision on the monetary policy rate, at the beginning and end of each quarter (January, March, April, June, July, September, October, December). |
| Main policy target | Policy target: Inflation target of 3% with a range between 2% and 4%, measured as year-over-year change in total CPI. Policy tool: Monetary policy rate (overnight), Market overnight rate (IBR) as close as possible to MPR |
Overview of key features
| Key policy rate | Reference rate |
|---|---|
| maturity (days) | 1 |
| Operating target | Interbank overnight non-collateralized rate |
| maturity (days) | 1 |
| Standing facilities | Lending, deposit |
| Corridor width (bp) | 200 |
| Reserve requirements | Yes |
| maintenance period | 14 days |
| Main operation 2 | RP |
| functions | Liquidity injection |
| maturity (days) | Normally 7 days and 1 labor day, but it can be longer. So far the longest period has been 1 year. |
| regular interval | Yes |
| frequency | Daily |
| Overall frequency | Daily |
| Discretion left to operational desk | No discretion left to operational desks for standard monetary policy operations. Some discretion left to operational desks for the implementation of certain asset purchase operations within the set of non-standard monetary policy measures. |
| Key policy signals via | |
| announcement | √ |
| keynote tender | |
| standing facility | |
| other |
Monetary policy communication
| Explicit use of forward guidance | No |
|---|---|
| Timing / media of policy announcement | Press release and press conference immediately after board meeting. Both transmitted through bank website. |
| Policy announcement and documents | Target policy rate and press release. |
| Explaining policy decisions | All eight policy decisions per year include a press release. Four of these releases later are accompanied by a detailed Monetary Policy Report and a Governor press conference. In addition, once per semester (march and july) the Board of Directors presents a Report to the Congress of Colombia. |
| Dissemination of minutes (timing / media) | Yes. Two labor days after board meeting. |
| Content of minutes | Description of economic conditions and discussion over MP decision. |
| Publication of forecasts 3 | Included in the Monetary Policy Report (four times per year). |
| Publication of projected path of policy rate 4 | The Central Bank doesn't present its own interest rate forecast; however, it provides some market-based measures (based on the Overnight Indexed Swaps) included in a report published alongside the minutes. |
Reserve requirements: ratios and size
| Main functions served | It used to serve as a liquidity buffer for credit establishments, now it’s under revision. |
|---|---|
| Domestic currency | Yes |
| Foreign currency | No |
| Average | Yes 5 |
| Required reserves | COP 35.22 bn 6 |
| Required reserve as % of GDP | 2.99% (as a percentage of annual GDP as of 2021 – Q4) |
| Actual reserves | COP 36.14 bn 7 |
| Actual reserve as % of GDP | 3.07% (as a percentage of annual GDP as of 2021 – Q4) |
Main features of reserve requirements
| Averaging | Yes, over maintenance period |
|---|---|
| Carry-over | No |
| Type | Lagged |
| Maintenance period | 14 days |
| end (day) | Tuesday |
| Calculation period | 14 days |
| end (day) | Tuesday |
| Lag before maintenance | 7 days |
| Vault cash | Yes |
| restrictions | No |
| Remuneration | No |
| average rate | 0% |
| marginal rate | 0% |
| Framework last changed | Apr-Jul of 2020 8 |
Liquidity position and forecasting
| Structural Position | Surplus |
|---|---|
| Most volatile factor(s) | Government deposits at the central bank |
| Most unpredictable factor(s) | Government deposits at the central bank |
| Forecast horizon(s) | 4 months |
| Frequency | Daily |
| Frequency of revision | Daily |
| Forecast published? | No |
Standing facilities: lending / market ceiling
| Name | Lending facility |
|---|---|
| Form | Repo |
| Pricing method | Fixed rate: Reference rate + 100bp |
| Maturity | 1 labor day |
| Access limited by/to | No borrower limits. Access to credit institutions, Bancoldex (development bank), broker dealers (participants of the government’s market making program) and asset managers of open-ended funds on behalf of those funds. 9 |
| Function(s) | Set upper limit to interbank interest rate |
Standing facilities: deposit / market floor
| Name | Deposit facility |
|---|---|
| Form | Deposit |
| Pricing method | Fixed rate: Reference rate - 100 bps |
| Maturity | 1 labor day |
| Access limited by/to | No limits. Access to credit institutions, Bancoldex (development bank), broker dealers (participants of the government’s market making program), asset managers of open-ended funds on behalf of those funds, government special institutions, asset managers (proprietary account, on behalf of third parties or managed funds), pension funds (proprietary account, on behalf of third parties or managed funds), securitization companies and insurance companies, Icetex (development bank), deposit insurance corporation, especially foreign exchange and financial intermediation service companies, capitalization companies, companies specializing in electronic deposits and payments and central counterparty risk clearinghouses. 10 |
| Function(s) | Set lower limit to interbank interest rate |
Open market operations: repo or reverse repo
| Name/Type 11 | RP* 12 |
|---|---|
| Maturity | Normally 7 days and 1 labor day, but it can be longer. So far the longest period has been 1 year. |
| Frequency | Daily |
| Pricing method | Auction. Minimum rate: reference rate, maximum rate: reference rate + 100 bps |
| Access limited by/to | Borrower limits only for repos backed with bank loans. - RP backed with public debt: credit institutions, Bancóldex (development bank), broker dealers (participants of the government’s market making program) and asset managers of open-ended funds on behalf of those funds. - RP backed with private debt: same counterparties of RP backed with public debt, government special Institutions, asset managers (proprietary account, on behalf of third parties or managed funds), pension funds (on behalf of severance pay funds), securitization companies and insurance companies. - RP backed with bank loans: credit institutions, Bancóldex (development bank) and government special institutions. 13 |
| Function(s) | Provide required liquidity |
Open market operations: central bank bills
| Name | Banco de la Republica´s securities* 14 |
|---|---|
| Total issuance | Never issued |
| Maturity | Announced before the auction |
| Restrictions on possible maturities | Announced before the auction |
| Pricing method | Single price auction |
| Access limited by/to | Not defined yet. |
| Discretion left to operational desk | Not defined yet. |
Open market operations: FX swaps
| Maturity | 30, 60, 90, 180 or 365 days. |
|---|---|
| Frequency | Discretionary. It was used between march and June of 2020 as one of the fx liquidity measures taken by the central bank to face the impact of the COVID-19 pandemic. |
| Pricing method | Single price auction with discretionary upper bounds for the forward leg. FX swap window for FX clearing houses. Pricing will be announced on the tender and will be a higher price with respect to market. |
| Access limited by/to | Auction: Banks, financial corporations, and finance companies, financial cooperatives (must be authorized as Exchange Market Intermediaries – EMI - and their capital base must be equal to the minimum amount to be achieved in order to organize a financial corporation), Pension Funds. All entities must have standing instructions from the Central Bank. Also, Ministry of Finance and Public Credit. Window: FX Clearing houses. 15 |
| Function(s) | To provide USD liquidity under a credit crunch scenario. |
Other significant liquidity management means
| Name/Type 16 | OT: 1. Outright sale of local public securities; 2. Outright purchase of local public securities; 3. Outright purchase of local private securities.; 4. Issuance of government bonds to constitute a deposit at the Central Bank; 5. Remunerated Term Deposits. 17 |
|---|---|
| Form | 1. On electronic system owned by the CB; 2. On electronic system owned by the CB; 3. Auction; 4. Auction; 5. Auction |
| Frequency | As required |
| Maturity | As required |
| Pricing Method | 1. Market price; 2. Market price; 3. Multiple price auction 4. Single price auction 5. Single price auction with a maximum interest rate. I.e. for 7-day deposits the maximum rate is MPR - 4 b.p. |
| Access limited by/to | 1. Credit institutions, Bancóldex (development bank), broker dealers (participants of the government’s market making program), asset managers of open-ended funds on behalf of those funds, government special institutions, asset managers (proprietary account, on behalf of third parties or managed funds), pension funds (proprietary account, on behalf of third parties or managed funds), securitization companies and insurance companies, Icetex (development bank), deposit insurance corporation, especially foreign exchange and financial intermediation service companies, capitalization companies, companies specializing in electronic deposits and payments and central counterparty risk clearinghouses. 2. Same of 1 without counterparty risk clearing houses. 3. Same of 2 without capitalization funds. Pension managers only on behalf of severance pay funds. 4. Participants of the government’s market making program. 5. Same of 1. |
| Function(s) | 1.To absorb liquidity; 2. To inject liquidity 3. To inject liquidity 4. To absorb long term excess liquidity; 5.To absorb short term excess liquidity. |
Settlement systems and intra-day liquidity facilities
| Settlement system | Real time gross settlement |
|---|---|
| Intra-day liquidity facility | Yes, intra-day repo |
| Charge | 0.10% |
| Foreign currency settlement system | No |
| CLS participation by banks | No |
| Other settlement system(s) | Public debt securities settlement system 18 |
Collateral
| Standing facilities: List of eligible collateral | Public debt securities (denominated in foreign and local currency) and Banco de la Republica´s securities. Banco de la Republica may activate acceptance of private debt, foreign government securities and bank loans. 19 |
|---|---|
| Standing facilities: Discretion of central bank on collateral 20 | The Central Bank can choose among the approved collateral securities, depending on the juncture. |
| Open market operations: List of eligible collateral | Public debt securities (denominated in foreign and local currency) and Banco de la Republica´s securities. Banco de la Republica may activate acceptance of private debt securities and bank loans. 21 |
| Open market operations: Discretion of central bank on collateral 22 | The Central Bank can choose among the approved collateral securities, depending on the juncture. |
Dissemination of operational information: liquidity forecast
| Forecast published? | No |
|---|---|
| Channel(s) | |
| Timing | |
| Remarks |
Dissemination of operational information: open market operations
| Volume and price published? | Yes |
|---|---|
| Channel(s) | Website |
| Timing | Shortly after results |
Dissemination of operational information: standing facilities
| Lending facility usage: Channel(s) | Central Bank website |
|---|---|
| Lending facility usage: Timing | Shortly after results |
| Deposit facility usage: Channel(s) | Central Bank website |
| Deposit facility usage: Timing | Shortly after results |
Other information dissemination
| Type | (i) FX intervention; (ii) Amount of outright purchases/sales; (iii) Issuance of government bonds to constitute a deposit at the Central Bank; iv) Remunerated Term Deposits |
|---|---|
| Channel(s) | Website |
| Timing | (i) Shortly after results if done through auctions. If done in a discretionary manner, the following month; (ii) Following month in July and January the composition of the portfolio is disclosed (6 month lag); iii) Shortly after results; iv) Shortly after results |
1 Describe as well the legal status of the mandate and involvement of government
2 RP = reversed purchase (repo, inject liquidity), RS=RRP=reversed sale (reverse repo, absorb liquidity), RT=reversed transaction (repo or reverse repo).
3 For instance, economic and inflation forecasts related to policy decision.
4 If applicable, describe the publication of any fan-charts or uncertainty bands around the forecasts/projections.
5 Bi-week period
6 As of August 2 of 2022
7 As of August 2 of 2022
8 In April 2020 the Board of Directors decided to inject permanent liquidity to the economy by reducing reserve requirements on current accounts, savings accounts, Certificates of Deposit (CD) of less than 18-month maturities, among others. In July 2020 (effective in November 2020) the reserve requirements on non-negotiable Certificates of Deposit (CDAT in Spanish) were changed.
9 In March of 2022 eligible counterparties were set to the ones mentioned.
10 In March of 2022 eligible counterparties were set to the ones mentioned.
11 RP=Reversed purchase (“repo”), RS=RRP=Reversed Sales (“reverse repo”), RT=Reversed transaction (RP or RRP).
12 * RS are not currently available. Transitory contraction is made through remunerated term deposits, which are uncollateralized.
13 In March of 2022 eligible counterparties were set to the ones mentioned.
14 *Banco de la Republica has never issue its own bills. Permanent monetary contraction is implemented with outright transactions.
15 Pension funds were included in 2020.
16 OT = Outright Transaction, DB = Direct Borrowing, DL = Direct Lending.
17 Mechanism number 4 has not been used by the central bank since 2014
18 Intra-day repo may be converted to overnight, where the charge becomes the reference rate + 200 bp.
19 Peace, green and solidarity bonds are included on public debt securities.
20 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.
21 Peace, green and solidarity bonds are included on public debt securities.
22 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.