NewsFlash: 289 
 
Forex, Derivatives and Structured Finance

Foreign Exchange Intermediaries: New sources for financing in foreign currency 

Foreign Exchange Intermediaries: New sources for financing in foreign currency

The Colombian Central Bank has recently enacted External Resolution 4 of 2015 ("Resolution 4") amending Article 59 of External Resolution 8 of 2000 ("Resolution 8"), regarding foreign financing transactions authorized to Foreign Exchange Intermediaries ("IMC").

Additionally, External Resolution 5 of 2015 ("Resolution 5") issued by the Colombian Central Bank introduces certain rules in connection with legal banking reserve (encaje bancario), applicable to certain bonds issued by IMC and considered as foreign financing transactions.

The main changes resulting from Resolution 4 and Resolution 5 are as follows:

  • Once Resolution 4 comes into force, IMC may obtain foreign financing (i) denominated in Colombian pesos but payable in foreign currency (COP linked-loans and facilities) from non-Colombian residents other than individuals, or (ii) by issuing bonds in international capital markets, denominated in Colombian pesos and payable in foreign currency.
  • Similarly, Resolution 4 establishes additional requirements in connection with foreign currency financing obtained by IMC for conducting active credit operations in Colombian pesos, with a term equal or less than the foreign financing obtained and hedged with an FX derivative that is in effect from disbursement to the maturity of the foreign financing.
  • The abovementioned transactions are subject to the following common requirements:
    • Such operations are subject to the deposit set forth in Article 26 of Resolution 8, currently established at 0%;
    • Such operations must be registered with the Central Bank as foreign loans,  regardless of the purpose for which they are performed (including operations related or complementary to the corporate purpose of IMC); 
    • Such operations are not subject to legal banking reserve, except for those bonds denominated in Colombian pesos and payable in foreign currency, issued in international capital markets, with a maturity less than 18 months, which are subject to legal banking reserve at a rate of 4.5%.
    • The proceeds of such operations may be kept in foreign currency while they are used for the authorized operations in Colombian pesos.

Resolution 4 and Resolution 5 in connection with the legal banking reserve applicable to bonds denominated in Colombian pesos and payable in foreign currency, with a maturity less than 18 months, will come into force on June 3, 2015

For more information contact our team