## 1uryea2022003 ## Source details **Canonical URL:** [1uryea2022003](https://www.imf.org/-/media/files/publications/cr/2022/english/1uryea2022003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1uryea2022003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1uryea2022003.pdf.json) --- ### EXECUTIVE SUMMARY — transparency alignment and institutional mission - The Central Bank of Uruguay (BCU) is implementing transparency practices broadly aligned with good practices for central banks. - Communications strategy and tools underpin the commitment to transparency and accountability for price stability and financial system soundness. - BCU mission: “to contribute to the wellbeing of the society.” - Management seeks further transparency improvements and recognition as an “independent, effective, and reliable institution with the capability to anticipate and respond to new challenges.” ### COMMUNICATION FRAMEWORK AND STAKEHOLDER ENGAGEMENT - Medium-term strategic plan prioritizes improving communication with domestic and international stakeholders. - Review assessed the communication framework and architecture as comprehensive and able to implement the strategic plan targeted to audiences. - Recent transformations in monetary policy and FX communication commended by stakeholders; serve as potential blueprint for other areas. - Recommendation: deepen financial education and outreach programs to support stronger accountability. ### GOVERNANCE AND INSTITUTIONAL AUTONOMY — gaps identified and suggested disclosures - Current disclosures: - General information on legal structure and mandate disclosed; legal basis in the OCOT published. - OCOT and Constitution establish the BCU as a “State Autonomous Entity.” - Gaps and suggested transparency enhancements: - Describe the main instruments through which institutional and financial autonomy are established and explain their relevance for mandate attainment. - Indicate whether third parties can participate in decision-making committees of the BCU. - Outline the process through which BCU decisions could be subject to judicial review. - Disclose whether the BCU and members of decision-making bodies are prohibited from seeking or receiving instructions from third parties. - Disclose term of office of Board members and dismissal criteria and procedure applicable to Board members. - Explain rationale and measures for implementing OCOT financial autonomy provisions and clarify financial reporting framework, including applicable auditing standards and all departures from the Uruguay Accounting Standards in the annual financial statements. ### MONETARY POLICY AND FOREIGN EXCHANGE (FX) MANAGEMENT — transparency status and enhancements - Recent enhancements: - 2020 changes established comprehensive disclosure practices for monetary policy and FX management. - COPOM: eight meetings per year (quarterly plus four intermediate meetings); communiqué same day; minutes within 72 hours; MPR improvements and simplified newsletter introduced. - In September 2020 BCU announced new monetary policy framework under IT regime shifting to a short-term interest rate as operational target. - Operational/technical disclosures and gaps: - Operational target identified as the overnight interbank money market rate. - Inflation target: aims for 5 percent annual inflation in a horizon of two years with a 2 percent deviation; target and range will change in September 2022 to a 4.5 percent annual inflation target and a deviation of 1.5 percent. - Standing deposit facility rate: currently at 1 percent. - Standing credit facility / Lombard Facility rate: currently at 15 percent. - LRM tenors disclosed: 30, 90, 180, and 360 days. - Foreign reserves represent 80 percent of the BCU’s total assets. - Recommended transparency enhancements: - (i) Offer regular venues (e.g., press conferences) for media questions on monetary policy decisions. - (ii) Disclose generic calibration and parameters of monetary instruments and outcomes on banks’ overall liquidity position. - (iii) Publish generic rationales for FX interventions and instrument choice given market context. - (iv) Disclose the report sent to the Parliament of the Republic (Memoria Annual) and provide additional disclosures on monetary–fiscal coordination. - (v) Reintroduce or clarify use of overnight interbank rate as operating target in IT framework. ### MONETARY OPERATIONS, LIQUIDITY, AND MARKETS — operational facts and recommendations - Disclosed instruments: OMOs; standing facilities; reserve requirements; monetary regulation bills (LRM); secondary-market OMOs; ISF (instrumentos de sintonia fina). - Primary market access: competitive tranche for Primary Dealers; non-competitive tranche currently 20 percent. - Market platform: OMOs and standing facilities conducted via BEVSA. - Reporting and publication practices: - Operational objective (one day money market interest rate) published daily. - Daily amounts and volumes of monetary operations published distinguishing counterparties. - MPR analyzes liquidity management and provides detailed outcomes. - Suggested additional disclosures: - Realized autonomous liquidity factors. - Generic parameters for OMO calibration (auction method, haircuts). - Full eligibility criteria and terms for counterparties in OMOs and standing facilities. ### FINANCIAL STABILITY, MACROPRUDENTIAL POLICY, AND STRESS TESTING — findings and recommendations - Legal/institutional context: - OCOT empowers BCU to safeguard financial stability though no explicit macroprudential mandate. - Decree 224/011 establishes external FSC (BCU, MOEF, COPAB, SSF); internal FSC created by Board Resolution D/96/2019. - Current disclosures and gaps: - SSF Operational Framework and RFS published but RFS largely descriptive. - Financial Stability Report (FSR) prepared for FSC meetings is routinely classified as “reserved” and not public. - Stress-testing methods are disclosed; unclear how results feed into macroprudential policy. - Macroprudential measures published chronologically without clear classification or linkage to objectives. - Key recommendations: - Publish a Financial Stability Report that includes relevant details of underlying analysis and stress-test results. - Publish a core set of aggregate financial soundness indicators (FSIs). - Disclose a comprehensive macroprudential policy framework document, including a clear description of available macroprudential tools and their potential effects and the respective roles/responsibilities of FSC members. - Provide detailed analysis of stress-testing results and how they guide policy. ### EMERGENCY LIQUIDITY ASSISTANCE (ELA) — legal basis, operational gaps, and transparency measures - Legal basis: Article 32 of the OCOT sets ELA eligibility and constraints; ELA cannot exceed one and half times the amount of BCU net assets. - Disclosed elements: - Eligibility: financial intermediation institutions. - Collateral: specified letters of credit, coupons, promissory notes maturing within 180 days with signatures including at least one of a financial intermediary. - Missing operational details: - Tripartite MOU between BCU, SSF, and COPAB for Article 32 implementation is not published. - No published operational framework distinguishing bilateral vs. market-wide liquidity support, conditionality, forward-looking solvency criteria, supervisory intrusion, mobilization of unconventional collateral, or coordination procedures across agencies. - Recommended disclosures for ELA transparency: - Publish a regulation outlining ELA objective (preserving financial stability). - Disclose key requirements for accessing ELA (including solvency, viability, full collateralization, and ELA agreement obligations). - Disclose key parameters for ELA (at least interest rate and tenor). - Develop an auxiliary transparency policy identifying type and timing of disclosures in the event of ELA activation. ### ANTI-CORRUPTION, INTERNAL CODE OF CONDUCT, AND AML/CFT — status and disclosure gaps - Anti-corruption and Code of Conduct: - National laws (e.g., Law 19.823 Code of Ethics in Public Service, Law 17.060) apply to BCU officials. - BCU Code of Ethics (2010) disclosed in Spanish as part of consolidated Board Resolutions (“Dec. 2974”). - Missing disclosures: rules on acceptance of gifts; abstention rules for conflicts of interest; specific pre- and post-public employment “cooling off” periods; functioning and activities of the Ethics Committee. - AML/CFT supervision and internal controls: - SSF/IFS designated for AML/CFT supervision; overview of policies and powers disclosed. - Missing public information: - How the BCU assesses AML/CFT risks of supervised institutions. - How supervisory policies are defined. - Internal resources allocated to AML/CFT supervisory activities. - Detailed description of BCU internal AML/CFT control framework; AML/CFT Risk Prevention Manual exists but is not publicly available. - Compliance Officer quarterly and annual reports are not public. - Direct statement: “The BCU plays a key role in safeguarding financial integrity; however specific information on its policies and processes related to AML/CFT supervision is limited.” - Suggested transparency improvements: - Publish a general description of the internal AML/CFT framework and control activities, subject to legal/confidentiality constraints. - Disclose measures of the overall effectiveness of these controls and resources allocated. - Publish information on Ethics Committee activities, Code of Conduct legal basis, and applicability of domestic anti-corruption legislation to BCU staff. ### ACCOUNTABILITY, RISK MANAGEMENT, INTERNAL AUDIT, AND OVERSIGHT — enhancements recommended - Current disclosures: - Financial statements externally audited and submitted to Court of Accounts; publications required within 120 days after fiscal year-end. - Internal audit function established by OCOT; Audit Committee (AC) created by Board resolution RD/11/2014. - Gaps and recommended disclosures: - Publish conditions for appointment of external auditors and eligibility criteria (independence, reputation, experience). - Publish role and reporting lines of internal audit and appointment criteria for its head; consider publishing internal audit charter. - Disclose oversight role and composition of the AC, including names of current members, AC activities, and annual report. - Clarify applicable financial reporting framework and describe departures from Uruguay Accounting Standards in Note 2 of financial statements. - Publish risk governance, risk management process, key risks mapping to mandate, and strategies to manage those risks; include a section in the annual report on key risks that emerged during the year and how they were contained. - Human capital governance: - Transparency practices categorized at “expanded” level; publishes policies on staff development, recruitment, diversity and inclusion. - Opportunities: include staff turnover data, leadership and succession policies, and consolidate HR information in a specific website section. ### COMMUNICATION, CONFIDENTIALITY, AND ACCESSIBILITY — findings and improvements - Communication framework: - Comprehensive communications policy, designated single official voice, Department of Institutional Communication, BCU Educa, newsletters, English dissemination to foreign investors, publications calendar. - COPOM calendar: eight meetings per year (January, March, May, June, July, September, October, December); MPRs published March, June, September, December. - COPOM publications: communiqué same day as meeting; minutes within 72 hours; MPR published three weeks after each end-of-quarter COPOM. - Confidentiality regime: - OCOT Articles 20 and 21 and Law 18.381 classify information; BCU Administrative Regulation D-337 (2017) creates a “restricted access” category. - Determination of classified information made by Board; Resolution D/246/2020 and RD/26/2019 apply. - Recommendation: better explanation of application of national Law on Access to Public Information and streamlining of confidentiality determinations. - Accessibility recommendations: - Translate technical language to simple language for different audiences; action to evaluate scope and resources. - Create searchable document registers (work in progress) beginning with Board Resolutions. - Improve website search tool and consolidate reports/publications in dedicated areas. - Recommendation: publish the annual report sent to Parliament (Memoria Annual) on the BCU website — currently prepared and submitted on March 1 but not published on the website. ### SELECTED OPERATIONAL AND TIMING FACTS (preserved) - Foreign reserves represent 80 percent of the BCU’s total assets. - Inflation target: 5 percent annual inflation in a horizon of two years with a 2 percent deviation; to change in September 2022 to 4.5 percent annual inflation target and a deviation of 1.5 percent. - COPOM publications: communiqué same day as meeting; minutes within 72 hours; MPR published three weeks after each end-of-quarter COPOM. - Publications calendar: MPRs in March, June, September, December; COPOM meetings in January, March, May, June, July, September, October, and December. - FY 2020 Financial Statements: Note 31 (Risk Management Practices); Note 2 (Significant Accounting Policies). - Access to information response time: 20 business days, extendable by another 20 business days. ### KEY RECOMMENDATIONS (selected) - Legal protection and autonomy: - Explain in the annual report and/or website: (i) that BCU decisions are subject to judicial review by third parties; (ii) whether the BCU and members of decision-making bodies are prohibited from seeking or receiving instructions from third parties, including the government; (iii) term of office of Board members; (iv) dismissal criteria and procedure applicable to Board members. - Financial autonomy and reporting: - Explain rationale and measures implementing OCOT provisions; clarify financial reporting framework and disclose departures from Uruguay Accounting Standards. - Risk management: - Outline key risks, risk governance, processes, and strategies; include an annual overview of key risks and containment approaches. - Accountability and audits: - Disclose conditions for appointment of external auditors; role and reporting lines of internal audit; oversight role and composition of AC; consider publishing charters and main activities. - AML/CFT and compliance: - Disclose applicability of domestic anti-corruption legislation to BCU staff; legal basis of Code of Conduct; activities and controls of the Ethics Committee; publish internal AML/CFT control framework and outcomes where appropriate. - Monetary and FX operations: - Offer regular venues (e.g., press conferences) for media questions on monetary policy; disclose generic calibration of monetary instruments and banks’ liquidity outcomes; publish generic rationale for FX interventions and instrument choice; disclose report sent to Parliament and monetary–fiscal coordination details. - ELA transparency: - Disclose key operational procedures to implement Article 32 of OCOT; produce an auxiliary transparency policy specifying information type and timing for disclosures in ELA activation. - Financial stability and macroprudential: - Publish a Financial Stability Report with in-depth analysis and stress-test results; publish a core set of aggregate FSIs; disclose macroprudential policy framework and tool effects; show how stress-test results feed into policy. ### ROADMAP, AUTHORITY RESPONSE, AND IMPLEMENTATION NOTES - Review conducted during September 7–20, 2021; changes after that date not considered. - Mission provided ten Key Recommendations across five CBT pillars. - BCU classified recommended actions as: (i) “Immediate implementation”; and (ii) “Implementation subject to further analysis.” - Immediate actions focus on gathering and publishing existing information via the website; other recommendations subject to strategic, legal, and external approvals. - Examples of proposed implementation steps: - Review and update published information on legal protection and autonomy. - Coordinate with internal and external audits to clarify financial reporting framework and disclose departures in future reports. - Publish Risk Management Methodology on the website and incorporate risk management process information into the annual report. - Review standards to determine what accountability and audit information can be made public and report through the website. - Publish an AML/CFT Risk Prevention Manual under “Normativa interna en Prevención del Riesgo de LA/FT” subject to prior Legal Department report on publication scope. ### APPENDIX — BCU LEADERSHIP, DEPARTMENTS, AND STAKEHOLDERS (selected) - President Diego Labat — BCU President and Board Chair. - Vice-President Mr. Washington Ribiero. - Key managers include Mr. Daniel Artecona (Legal Advisory), Mr. Juan Pedro Cantera (Superintendent of Financial Services), Mr. Adolfo Sarmiento (Manager, Economic Policy and Markets), among others. - Departments and committees: Accounting and Budget Department; Audit Committee; Compliance Officer; Communications Department; Economic Policy and Markets Division; Financial Stability Department; Internal Audit Department; Monetary Policy Committee; Reserves Management Department; Superintendency of Financial Services. - External stakeholders consulted: Ministry of Economy and Finance; COPAB; commercial banks; FX traders; Chamber of Industries; rating agencies (e.g., FITCH); media; academia. *Source: Central Bank of Uruguay—CBT Review Executive Summary and Detailed Review excerpts (IMF).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 4 ### EXECUTIVE SUMMARY ### Transparency alignment and institutional mission - The Central Bank of Uruguay (BCU) is implementing transparency practices that are broadly aligned with the good practices for central banks (Table 1). - The BCU’s comprehensive communication tools and strategy underpin the commitment to transparency and its accountability for the price stability and financial system soundness mandates. - The BCU’s value statements support its mission “to contribute to the wellbeing of the society.” - The BCU management seeks further improvements in transparency relying on strong legal and institutional arrangements and intends to be recognized as an “independent, effective, and reliable institution with the capability to anticipate and respond to new challenges.” ### Communication framework and stakeholder engagement - Improving communication with domestic and international stakeholders is a significant pillar of the medium-term strategic plan. - The communication framework and architecture were assessed as comprehensive in this IMF Central Bank Transparency Code (CBT) review and provide means to implement the strategic plan targeted to audiences. - Recent transformations in monetary policy and foreign exchange (FX) management communication were commended by stakeholders and can serve as a blueprint for other areas. - Deepening financial education and outreach programs can support stronger accountability to stakeholders. ### Governance and institutional autonomy (gaps identified) - General information about legal structure and mandate is disclosed, but enhanced transparency is needed on the scope and depth of institutional, personal, and financial autonomy. - Specific transparency enhancements suggested: - Describe the main instruments through which institutional and financial autonomy are established and explain their relevance for the attainment of the mandate. - Indicate whether third parties can participate in decision-making committees of the BCU. - Outline the process through which the BCU’s decisions could be subject to judicial review. - Additional disclosures recommended to enhance institutional accountability: - Risk management framework, internal compliance, and oversight for AML/CFT risks. - Applicability of domestic legislation on corruption to BCU staff and relevance for the workings of the BCU’s Ethics Committee. - How public resources are put at risk, management of those risks, and accountability through independent oversight. - Interactions arising from the BCU’s role as agent, adviser, and banker to the government, and services provided to other public entities. ### Monetary policy and FX management - Enhancements to transparency practices about monetary policy were implemented in 2020, establishing comprehensive disclosure practices. - The mission acknowledged amplified disclosure of information on policy decisions and supporting analysis for monetary and FX operations. - The (re)introduction of the overnight interbank market rate as the operating target in the inflation targeting (IT) framework would help clarify the BCU’s monetary policy stance. - Further transparency enhancements identified: - Offer regular venues for stakeholders to participate in policy decisions and to discuss rationale for FX interventions, including instrument choice given market context. - Disclose generic information related to the calibration and parameters of monetary policy instruments and outcomes on banks’ overall liquidity position. - Publish generic descriptions of rationale for FX interventions and instrument choice given market context. - Disclose the report sent to the Parliament of the Republic. - Provide additional disclosures on coordination of monetary and fiscal policies. ### Financial stability, macroprudential policy, and ELA - Core elements for financial stability analysis, macroprudential policy, and broader financial stability are disclosed, but important enhancements could be made. - Gaps noted: - The communique after the semi-annual meetings of the inter-agency Financial Stability Committee (FSC) lacks detail. - Transparency about the relevance of stress-testing exercises for policy decisions needs improvement. - Information about the framework for emergency liquidity assistance (ELA) activation is absent; key operational features and roles/responsibilities of agencies that share responsibility for financial stability are not disclosed. - Publication of a core set of aggregate financial soundness indicators, a dedicated macroprudential policy framework document, and clearer description of available macroprudential tools and their potential effects are recommended. - Enhancing transparency relating to ELA: - Disclose key operational procedures that facilitate implementation of the requirements of Article 32 of the Organic Charter of the Central Bank, 2008 (OCOT). - Develop an auxiliary policy on transparency to identify type of information and timing for disclosures in the event of ELA activation. ### Financial integrity and consumer protection - The BCU plays a key role in safeguarding financial integrity, but more information on its AML/CFT supervision of the financial sector could be disclosed. - General information on AML/CFT supervisory policies, powers, and processes could be supplemented with more detailed information. - The BCU has developed a transparent and efficient system to safeguard the rights of financial consumers. - The model system on consumer protection inspires public confidence and trust. - The BCU’s website discloses responsibilities for this function through the SSF. - Important components of a solid consumer protection framework are well disclosed, accessible, and clear for consumers and financial institutions. ### Accountability, risk management, and oversight (enhancements) - Recommended transparency enhancements for accountability mechanisms: - Include on the website and/or in the annual report: (i) conditions for appointment of external auditors and related eligibility criteria (independence, reputation, experience); (ii) role and reporting lines of internal audit and criteria for appointment of its head; (iii) oversight role of the Audit Committee (AC) and its composition, including names of current members. - Consider publishing the charters of the internal audit function and the AC, and information on their main activities during the financial year. - Transparency on risk management should outline: - Key risks as they relate to the BCU’s mandate and the BCU’s attitude towards these risks. - Risk governance and risk management processes. - Strategies to manage these risks. - The annual report could include a section overviewing key risks that emerged during the year and the BCU’s approach to containing them. - Enhance disclosure on applicability of domestic anti-corruption legislation to BCU staff and its Code of Conduct, stating the legal basis of the Code and disclosing activities and controls of the Ethics Committee. - Provide information on oversight of the compliance department, including the compliance framework, policy with respect to internal AML/CFT control activities, their oversight, and outcomes from their activities. ### Key recommendations (selected) - Transparency on legal protection and institutional and personal autonomy: - Explain in the annual report and/or website: (i) that BCU decisions are subject to judicial review by third parties; (ii) whether the BCU and members of decision-making bodies are prohibited from seeking or receiving instructions from third parties, including the government; (iii) term of office of Board members; (iv) dismissal criteria and procedure applicable to Board members. - Transparency on financial autonomy: - Explain rationale and measures for implementing related provisions of the BCU legal framework. - Clarify financial reporting framework, including applicable auditing standards and all departures from the Uruguay Accounting Standards in the annual financial statements. - Transparency on risk management: - Outline key risks, governance, processes, and strategies; include overview of key risks emerged during the year and containment approaches in the annual report. - Transparency on accountability mechanisms: - Disclose conditions for appointment of external auditors; role and reporting lines of internal audit; oversight role and composition of the Audit Committee; consider publishing charters and main activities. - Transparency on anti-corruption and compliance: - Disclose applicability of domestic anti-corruption legislation to BCU staff, legal basis of Code of Conduct, activities and controls of the Ethics Committee, and oversight of compliance department including internal AML/CFT control activities and outcomes. - Monetary and FX policy and operations: - Offer regular venues (e.g., press conferences) for media questions on monetary policy decisions. - Disclose generic calibration and parameters of monetary instruments and banks’ liquidity outcomes. - Publish generic rationale for FX interventions and instrument choice. - Disclose report sent to Parliament and provide more on monetary–fiscal coordination. - ELA transparency: - Disclose key operational procedures to implement Article 32 of the Organic Charter of the Central Bank, 2008 (OCOT). - Produce an auxiliary transparency policy specifying information type and timing for disclosures in ELA activation. *Source: Central Bank of Uruguay—CBT Review Executive Summary (IMF).* ### 9. BCU’s transparency practices in financial stability stress-testing and macroprudential ### 9. BCU’s transparency practices in financial stability stress-testing and macroprudential ### Key recommendations (from executive summary) - Publish a Financial Stability Report (FSR) that includes relevant details of the underlying analysis of financial stability risks. - Publish a core set of aggregate financial soundness indicators. - Disclose a comprehensive macroprudential policy framework document, including a clear description of available macroprudential tools and their potential effects. - Provide a detailed analysis of stress-testing results and their use in guiding policy. - Provide clarity about the institutional arrangements of the inter-agency FSC, including the respective roles and responsibilities of the members of the FSC, to strengthen BCU accountability for financial stability and soundness. - Improve information access across all areas by utilizing the existing comprehensive communications framework, including: - Translating more technical language in reports to simple language suited for different audiences. - Creating viable and searchable document registers for important documents such as Board Resolutions to enable easy access to past issues relevant for current decisions and communications. ### Scope and objective of the CBT review - The mission conducted a CBT review at the request of the BCU; the organizational structure and financial soundness objectives of the BCU qualify this mission under the CBT pilot reviews to cover all principles of the CBT. - The review maps the BCU’s transparency choices for all CBT principles to a range of practices, covering transparency in: (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. - Intended uses by the BCU: - Support its three-year strategic reform that outlines improvement in communication and transparency as a central theme. - Help develop action plans to improve reporting of key economic information and strengthen stakeholder relationships by improving accessibility of content on its website and through social media networks. - Categorize current transparency practices across responsibilities and identify strengths and areas for improvement, with particular focus on recent initiatives to enhance communication on monetary policy decisions. ### Approach and methodology - Sources used: BCU self-review, mission desk reviews, in-depth discussions with the BCU Board, management, staff, and key external stakeholders. - External stakeholders consulted included: Ministry of Economy and Finance (MOEF), Bank Savings Protection Corporation (COPAB) that sits on the FSC, Public Debt Coordination Committee (PDCC), commercial banks (publicly and privately owned), FX traders, the Chamber of Industries, civil society groups, rating agencies, the media, and academia. - The review was conducted principle-by-principle, considering dimensions of transparency including timeliness, periodicity, and quality of disclosure, and referred to the BCU Survey on the Image of the Central Bank (five-year cycle). ### Legal and institutional context - The review recognizes the role of the Constitution and relevant laws—specifically the Law on Free Access to Public Information and the Law on Classified Information—in shaping BCU transparency choices and the limits on disclosure. - The BCU’s Confidentiality Policy (see Principle 1.8) is essential for contextualizing CBT review outcomes; the BCU must balance transparency improvements with legal confidentiality requirements. ### Background on macroeconomic and financial sector context - The Uruguayan economy continues to normalize after the COVID-19 pandemic; economic performance is expected to reflect broad-based improvements across most sectors over the near term. - No evidence (yet) of weaknesses emerging from pandemic effects given low exposure of the financial sector to highly affected business sectors. - A comprehensive assessment of the financial sector and pandemic policy impacts will be undertaken in the Financial Sector Review Program mission scheduled for 2022. - In response to COVID-19, the BCU pursued accommodative monetary policy, including measures to increase money market liquidity and support credit flow: reduced reserve requirements and allowed banks to extend moratoria on credit; communications of measures were via circulars published on the BCU’s website. - Uruguay’s financial sector shows relatively limited depth and financial dollarization remains a prominent feature; private sector credit growth remains sluggish, banks retain large reserves domestically in central bank instruments and with overseas financial institutions. - The financial sector offers standard banking and insurance products in pesos and dollars; credit markets are highly segmented between dollar and peso loans. - Some stakeholders attribute dollarization and dollar pricing to protection against inflation outcomes that exceed the maximum announced target, pursued even with inflation-indexed savings and wage indexation. ### Recent initiatives to improve transparency of monetary policy and coordination with fiscal policy (Box 1) - Actions announced in April 2020 to enhance monetary policy transparency: - Frequency: Increased frequency of COPOM communication by adding four intermediate meetings to the four quarterly meetings (total of eight COPOM meetings). - Materials: Expanded materials disclosed related to COPOM decisions: (i) Communiqué after each of the eight COPOM meetings on the day of the meeting that includes a forward-looking review; (ii) disclosure of the minutes within 72 hours after the meeting; and (iii) improvements in the Monetary Policy Report (MPR) by incorporating macroeconomic models and economic results, as well as the evaluation of policy results. - New product: A newsletter designed with friendly format and simple language to reach broader households and entrepreneurs. - Expanding the audience: Dissemination tailored to audiences—members of Parliament and media: COPOM communiqué and minutes in Spanish; foreign investors: COPOM communiqué and minutes in English; Chamber of Entrepreneurs: newsletter. - Other measures: Relaunching an improved survey on inflation expectations and publication of results; publication of economic models used by the BCU in forecasting main macroeconomic variables. - In September 2020, the BCU announced a new monetary policy framework under the IT regime, shifting from a monetary aggregate operational target to a short-term interest rate. - A joint conference by the BCU President and the Minister of Finance highlighted coordination issues, including: - Disclosure of macroeconomic projections over a rolling five-year period. - Ensuring fiscal consolidation plans are consistent with BCU’s commitment to lower inflation and breaking inflation inertia. - Priority to rebuild BCU credibility and “search for a quality currency, including the reconstruction of peso markets to mitigate financial dollarization.” - The BCU launched a working group on de-dollarization covering reform agenda, financial education, and public communications. ### Main findings — Pillar I: Transparency in Governance - Mandate and legal structure: - The OCOT provides information on the BCU’s legal mandate, but disclosure of the BCU’s legal protection is missing. - Suggested enhancements: include descriptions of (i) the specific requirements for the BCU to fulfill its mandate; (ii) the general framework currently applied to the BCU, including relevant provisions in the Constitution and other laws; and (iii) the judicial review process of the BCU’s decisions, including those of the SSF. - Institutional autonomy: - The Constitution and the OCOT establish the BCU as a “State Autonomous Entity,” with OCOT specifying technical, administrative, and financial autonomy. - Transparency on what being an autonomous entity means in practice could be strengthened by publicly indicating: - Whether the BCU and members of decision-making bodies are prohibited from seeking or taking instructions from third parties. - Whether representatives from third parties, including the government, can attend BCU meetings. - The term of office of Board members and the dismissal criteria and procedures applicable, and how these operate in practice. - The role of Executive and Legislative Branch members on committees where BCU shares responsibilities (e.g., Macroeconomic Coordination Committee (MCC) and FSC) could be discussed on the website. - Financial autonomy and safeguards: - OCOT establishes core financial autonomy provisions including rules on capital and profit distribution, limits on monetary financing of the government, publication of audited financial statements, and approval and execution of the budget. - The central bank does not presently explain the rationale and measures to safeguard financial autonomy. - Suggested disclosures: explain the rationale for financial autonomy, tools for implementing OCOT provisions, how resources are safeguarded from risks of BCU activities, and accountability mechanisms that ensure oversight of effective use. *Source: 1uryea2022003 - 9. BCU’s transparency practices in financial stability stress-testing and macroprudential* ### 24. Concurrently, disclosures about the BCU’s accountability mechanisms could be ### Concurrently, disclosures about the BCU’s accountability mechanisms could be improved ### Accountability mechanisms - The OCOT establishes high-level provisions for accountability, including the publication of financial statements that are examined by external auditors and the Court of Accounts. - Publications thereto are required within 120 days after fiscal year-end. - The OCOT provides for an independent internal audit function. - The OCOT does not provide for an AC, but the Board nevertheless established one to assist with oversight of financial statements, the audit mechanism, and internal controls. - The BCU’s website and annual report do not provide an overview of these accountability mechanisms. - Recommendation: Publish a high-level overview of accountability mechanisms on the website and/or in the annual report. ### Risk exposures and risk management disclosures - Current transparency on risk management consists mainly of disclosures in financial statements on risks from managing foreign reserves. - Disclosures about overall risk governance and management of operational risk are limited. - BCU publications lack an institutional view of the bank’s risk practices and governance arrangements. - Suggested disclosures to improve transparency: - (i) the key risks as they relate to the BCU’s mandate and the bank’s tolerance for these risks; - (ii) the risk governance and the risk management process; - (iii) the main strategies to manage these risks. - Recommendation: Include in the annual report a section explaining the main developments in its key risks. ### Enhancing accountability via specific disclosures - The BCU could disclose on its website and/or in its annual report: - (i) the conditions for appointment of external auditors and related eligibility requirements (independence, reputation, experience); - (ii) the role and reporting lines of the internal audit function and criteria for the appointment of its head; - (iii) the oversight role and composition of the AC, including the names of the current members. - While priority should be given to a high-level overview, the BCU could also consider publishing: - charters of the internal audit function and of the AC; - information on their main activities in a reporting period. - The mission noted that the BCU’s financial reporting framework and the applicable auditing standards are not clearly defined, nor explained in the BCU’s financial statements when it comes to exceptions from the Uruguay Accounting Standards. This could be easily remedied at the next occasion. ### Human capital governance and transparency - Transparency practices on governance and management of human capital are categorized at the “expanded” level. - The BCU publishes internal policies and regulations on staff development, performance management, diversity and inclusion, external recruitment, and staff competencies on its website and in the annual report. - The website describes ongoing recruitment campaigns with detailed documentation for each step. - Opportunities for improvement: - (i) inclusion of data on staff turnover in the annual report; - (ii) publication of other relevant policies (e.g., on leadership and succession and policies or measures for attracting, promoting, and retaining employees). - Recommendation: Consolidate information on human resource management under a specific website section rather than dispersed disclosures. ### Communications and confidentiality - The BCU has a well-articulated and structured communications policy with comprehensive tools and a strategic program to enhance engagement. - The BCU website is in Spanish and partially in English and is the most frequently used communication tool. - The framework includes monitoring tools, including surveys of public views of the BCU. - Observations and recommendations: - The website search methods may curtail access to information and could be enhanced. - Expand financial education programs and simplify technical language to make information more accessible. - The BCU publishes internal principles and guidelines for institutional communications, including powers delegated to the SSF. - Confidentiality: - The confidentiality policy is established by the OCOT and the national Law on Access to Public Information (Ley 18.381). - The application of this national law to the BCU could be further explained. - The application of the confidentiality policy can be streamlined to ensure consistency in documents classified by the BCU that may be publicly disclosed elsewhere (e.g., policies, guidelines, technical procedures, and Memorandums of Understanding published by counterparts). - The BCU could publish the report submitted annually to the Parliament of the Republic since this document is not specifically classified under the confidential policy. ### Monetary policy transparency - Key contextual features considered: (i) high level of financial dollarization; (ii) inflation inertia and effects of public sector wage formation; (iii) an open capital account; (iv) strength of the exchange rate channel in transmission; (v) a shallow FX market characterized by a concentrated market with limited transactions; (vi) institutional arrangements for coordination of monetary and fiscal policies. - Review aspects included: (i) disclosures on research related to inflation inertia; (ii) disclosures on analytical tools for exchange rate alignment; (iii) disclosures on frameworks for monetary–fiscal coordination; (iv) disclosures on rationale for FX interventions; (v) disclosures on ex-post evaluations of FX intervention economic impact; (vi) disclosures on assessment of strength of transmission channels. - Recent practices: - Publications cover the institutional framework for monetary and FX policies established by the MCC; inflation inertia research; transmission channel strength; coordination through the MCC and the Public Debt Coordination Committee (PDCC); episodic ex-post discussions on FX intervention impact; and the broad objective of FX intervention in the context of IT with an open capital account and a floating exchange rate arrangement. - Transparency level: overall categorized at the comprehensive level with tailored documents for different stakeholders. - Public access: - Monetary policy communiqué is issued following COPOM meetings. - Minutes of COPOM meetings with assessment and voting positions are published on the BCU website. - A quarterly MPR is published; a simplified non-technical MPR version is also published. - Accountability fulfilled through an annual report to the Parliament of the Republic to fulfill Article 46 of the OCOT. ### Monetary operational framework disclosures - The BCU discloses its monetary operational framework, operational targets, objectives, and tools. - Critical components are explained on the website and in the Recopilación de Normas de Operaciones (RNO). - Historical data on stocks and flows of various monetary instruments are available at varying frequencies. - Rules governing issuance of the main policy instrument, the monetary regulation bills, are disclosed, including a calendar of future auctions, results of previous auctions, and outstanding amounts. - Categories of monetary policy counterparties and access criteria are clearly defined and disclosed. - Recommendation: Additional disclosure of generic information on calibration and parameters of instruments and the effect of BCU actions on overall market liquidity would enhance information quality. ### Foreign exchange management and reserves management - The operational framework for FX interventions in a floating exchange rate regime is disclosed; interventions aim to reduce excessive volatility and cushion abrupt exchange rate swings in a concentrated market. - All FX transactions are executed through BEVSA’s electronic platform and daily amounts are disclosed on the BCU website, including instrument type (e.g., spot, future, non-deliverable forward). - Counterparties must comply with BEVSA market conduct norms disclosed on its website. - Transparency on FX interventions: - Daily publication of FX interventions and instrument types. - Quarterly MPR data on FX operations with the central government and FX interventions in spot and forward markets over the last three years. - Recommendation: Further disclosure of the effects of intervention given the concentrated FX market; publish generic rationale for choice of instruments and rationale for FX intervention to enhance public understanding. - FX administration: - The BCU’s role in FX administration arises from oversight of the financial system; it is not structured to oversee, regulate, or implement measures for managing cross-border financial flows. - Ley 14.371 (disclosed on the BCU website) indicates Uruguay has had an open capital account since 1975 and does not apply restrictions to current account transactions. - No recent policy disclosures relevant for CBT concerning regulation of cross-border financial flows, transactions in foreign currencies within the country, or transactions in domestic currency between residents and non-residents. - Disclosure of allowable FX activities and licensing requirements for entities authorized to execute FX activities are accessible via the BCU website. ### FX reserves management transparency - FX reserves management transparency categorized at the expanded level. - The BCU discloses detailed information on the governance framework for managing international reserves. - Frequent disclosures are made through a quarterly report and the annual financial statement, including detailed accounts for each reserve tranche and overall risk management. - Opportunities to improve transparency: - Disclose the eligible investments for FX reserves (OCOT makes no mention). - Publish the FX Reserves Investment Strategy approved by the BCU Board (currently not published). - Describe investment decisions and results achieved measured relative to benchmarks. - Provide information on criteria for setting the size of the reserve tranches to improve accountability in line with Article 28 of the OCOT. ### Financial stability and macroprudential policies - The OCOT empowers the BCU to safeguard the stability of the financial system though it does not have an explicit macroprudential mandate. - The BCU has introduced macroprudential policy instruments aimed at safeguarding banking system stability. - Current disclosures: - The SSF describes its role in macroprudential area in its Operational Framework with broad strategy and objectives. - Macroprudential tools are generally not classified as such; measures are published chronologically alongside other prudential measures, hampering identification. - Links between macroprudential objectives, specific measures, and supporting analysis are generally not made public. - Ex-post evaluations of macroprudential policies have not been conducted. - Communication channels: - Press releases after semi-annual FSC meetings provide general overviews without supporting analysis. - The FSR prepared by the BCU for the FSC meetings is kept confidential. - The Report on the Financial System (RSF) prepared by the SSF is mostly descriptive without much analysis of financial stability risks. - Stress testing methods are clearly disclosed, but it is not clear how results feed into analysis of macroprudential risks and mitigation measures. - Recommendations to enhance transparency: - Clarify roles of actors in macroprudential policymaking in a comprehensive policy framework document. - Describe macroprudential policy tools with their potential contribution to objectives. - Clarify relevance of stress tests, indicators, and analysis in identifying financial sector risks. - Publish a modified version of the FSR with in-depth analysis and stress test results as a periodic public vehicle for financial stability assessments. - Periodically publish a core set of aggregate FSIs, building on individual bank financial indicators currently on the BCU website. ### Emergency Liquidity Assistance (ELA) - The legal basis for ELA is laid out in the OCOT, but key features for operationalization are missing. - Disclosure of key features is needed, including the roles of the BCU, the SSF, the COPAB, and the Minister, to explain application and implementation. - Comprehensive transparency practices for ELA would include publication of: - (i) a regulation outlining the objective of ELA (preserving financial stability); - (ii) key requirements for accessing ELA (including solvency, viability, full collateralization, and execution of an ELA agreement defining the counterparty’s obligations); - (iii) key parameters for ELA (at least interest rate and tenor). ### Anti-corruption, internal Code of Conduct, and financial integrity - The BCU discloses general information on anti-corruption and Code of Conduct practices, but applicability transparency could be enhanced. - The legal framework notes anti-corruption legislation and measures apply to decision-makers, staff, and agents of the BCU. - It is not clear from disclosed information that the national law on the Code of Ethics in the Public Service serves as the BCU’s Code of Conduct. - The separate Code of Ethics of the BCU includes general guidelines on conduct, confidentiality, transparency, impartiality, and prohibitions. - Absent disclosures: - Rules on acceptance of gifts; - Abstention from decisions where a conflict of interests exists; - Specific pre- and post-public employment requirements (“cooling off” periods). - Recommendation: Disclose information regarding the functioning and activities of the Ethics Committee, especially internal control measures to safeguard independence and ensure accountability of the committee. *Source: 1uryea2022003 - Extracted content on BCU transparency, accountability, risk management, communications, monetary and FX policies, reserves, macroprudential policy, ELA, and anti-corruption.* ### 46. The BCU plays a key role in safeguarding financial integrity; however specific ### 1uryea2022003 - 46. The BCU plays a key role in safeguarding financial integrity; however specific ### AML/CFT supervision: disclosures and gaps - The BCU discloses general information about its AML/CFT supervisory policies, powers, and processes. - Missing public information: - How the BCU assesses the AML/CFT risks of its supervised institutions. - How the BCU defines its supervisory policies. - The internal resources allocated to AML/CFT supervisory activities. - Direct statement from the review: “The BCU plays a key role in safeguarding financial integrity; however specific information on its policies and processes related to AML/CFT supervision is limited.” ### Transparency of BCU internal AML/CFT controls - Current status: - The transparency of the BCU’s internal AML/CFT controls, including about its compliance function, is not implemented. - The BCU does not disclose information on its internal compliance framework related to activities and services that may give rise to AML/CFT risks. - Institutional context: - OCOT makes no provision for this level of internal oversight; the Board created a compliance function to ensure internal compliance with domestic and international AML/CFT standards. - Through this function the BCU has developed AML/CFT policies and evaluates compliance throughout its business units, subsidiaries, and branches. - Specific disclosure gaps: - No public disclosure on internal control activities, their oversight and accountability within the organizational structure. - No public disclosure on the human and technical resources allocated to perform these compliance functions. - Suggested transparency improvements: - Provide disclosures on the internal AML/CFT framework and policies. - Provide relevant descriptions on internal AML/CFT controls and the control activities carried out for compliance with AML/CFT laws. - Disclose measures of the overall effectiveness of these controls. ### Consumer protection: framework, accessibility, and accountability - Legal and operational framework: - BCU has a legal mandate for consumer protection (OCOT Article 35; Law 17.250 (2000) and Regulatory Decree of August 23, 2000). - The SSF addresses inquiries and complaints and promotes consumer protection in access and use of financial services and products. - Disclosures and access: - Rights and responsibilities of consumers are accessible on the BCU website section “Usuario Financiero.” - Access channels include the digital portal “Usuario Financiero,” a Chatbot, a dedicated telephone service, and email. - Scope of competence and protections: - Scope includes credits, deposits, cards, checks and services overseen under the consumer protection system, and supervised institutions including banks, Pension Funds (AFAP), insurance companies and the securities market. - Personal data protection: supervised entities must comply with national law (Ley 18.331) originating from AGESIC; a financial customer can file complaints with the SSF for non-compliance. - Management of financial data: SSF adopts resolution 246/2020 (2b) to ensure compliance with personal data protection in administrative file processing and publication of consumer complaint activities. - Assurances: access to the Confidential Protection System implemented at BCU. - Dispute resolution and enforcement: - “Usuario Financiero” portal provides an efficient and timely channel to receive and redress consumer complaints. - Financial institutions can be sanctioned for breaches identified through routine supervisory inspections or complaints. - Outcomes from disputes and applied sanctions are published on the BCU’s website. - Consumer protection outcomes: - Complaint process is accessible, clear, affordable, timely and efficient. - BCU extensively discloses resolutions, sanctions, and statistics regarding complaints and queries. - Financial education programs are a priority, including BCU Educa and targeted programs for vulnerable groups. - BCU reports policy outcomes related to consumer protection and financial education initiatives. ### Transparency in official relations - International dealings: - BCU comprehensively discloses dealings with international institutions and other central banks, including explanations of roles and benefits from international engagements. - Coordination with government: - BCU interactions with the Executive are channeled through the MCC and, technically, with the PDCC of the MOEF. - Recommendation: BCU should clearly disclose coordination policies and exchange of information with the government and its agencies; policies and practices from technical-level interactions should be explained publicly. - Suggestion: Information currently disclosed by the MOEF about functions the BCU performs for the government should also be published on the BCU website. - Interaction with other public agencies: - Need to clarify roles and responsibilities in interactions with COPAB and disclosure of cooperation arrangements, guidelines for exchange of information, and technical contributions of the BCU and the SSF to the FSC. - General recommendation: implement a disclosure policy with any domestic public financial counterpart of the BCU. ### Detailed review context and timing - Review basis and mission dates: - The review is based on the current state of BCU’s transparency practices as of the mission during September 7–20, 2021. - Changes implemented after the review date were not considered. - Methodology: - Review categorizes transparency practices of the BCU in relation to the CBT principles and guided by CBT criteria. - Considerations included BCU’s legal mandate, policy context, sophistication of Uruguay’s financial system, and prevailing legal framework (rules on access to information, confidentiality, active transparency). - The review exercised judgment where necessary while adhering to a common methodology. ### Authority’s response and follow-up actions - Overall assessment: - The Board of the BCU thanks the IMF and mission; recognizes value of the CBT review. - The mission noted that “The Central Bank of Uruguay (BCU) is implementing transparency practices that are broadly aligned with international practices.” - Mission highlighted strengthened monetary policy disclosure introduced in April and September 2020. - Areas for improvement noted by the mission: - Transparency about institutional, personal, and financial autonomy, risk management, and accountability mechanisms. - Enhancements in core transparency elements for financial stability analysis and macroprudential policy. - On AML/CFT: “The BCU plays a key role in safeguarding financial integrity, but more information on its AML/CFT supervision and internal controls could be disclosed.” - Roadmap and implementation approach: - Mission provided ten Key Recommendations across the five CBT pillars. - BCU classified recommended actions as: (i) “Immediate implementation”; and (ii) “Implementation subject to further analysis.” - Immediate actions focus on gathering and publishing existing information via the website; other recommendations will be analyzed considering strategic guidelines, legal framework, and external approvals where necessary. - Board estimates that mostly all recommendations will be considered in next year’s activity plan. ### Proposed roadmap excerpts relevant to AML/CFT and governance (from Table 2) - Recommendation 1 (Transparency on legal protection and autonomy): - Suggested disclosures in annual report and/or website: (i) that the BCU’s decisions are subject to judicial review; (ii) whether the BCU and members of decision-making bodies are prohibited from seeking or receiving instructions from third parties, including the government; (iii) the duration of the term of office of the members of the Board; and (iv) the dismissal criteria and procedure applicable to the members of the Board. - Implementation: “Will review the information that is published and update it considering these recommendations.” - Recommendation 2 (Transparency on financial autonomy): - Suggested disclosures: explanation of rationale and measures implementing financial autonomy provisions; clarify financial reporting framework and highlight departures from Uruguay Accounting Standards in financial statement notes. - Implementation: “This recommendation requires the coordination with both internal and external audits in order to evaluate including that information in future reports.” - Recommendation 3 (Transparency on risk management): - Suggested disclosures: (i) key risks as they relate to the BCU’s mandate and attitude towards them; (ii) risk governance and risk management process; (iii) main strategies to manage these risks; include main developments in key risks in annual report. - Implementation: “Although the risks faced by the BCU are classified as confidential, it was decided to publish the Risk ́s Management Methodology on the website and incorporate information about the risk ́s management process into the annual report.” - Recommendation 4 (Transparency on accountability mechanisms): - Suggested disclosures: conditions for appointment of external auditors and eligibility criteria; role and reporting lines of internal audit and appointment criteria for its head; oversight role and composition of the Audit Committee (AC) including names of current members. - Implementation: “The BCU can review each of these standards to determine what can be made public, in which case it would be reported through the website in the corresponding areas.” - Recommendation 5 (Anti-corruption measures and Code of Conduct): - Suggested disclosures: applicability of domestic anti-corruption legislation to BCU staff; legal basis of the BCU’s Code of Conduct; activities and controls of the BCU’s Ethics Committee. - Implementation: “The BCU can review each of these standards to determine what can be made public, in which case it would be reported through the website in the corresponding areas.” - Recommendation 6 (Internal AML/CFT control framework disclosure): - Suggested disclosure: information on internal control framework relating to activities or services that may give rise to AML/CFT risk, including internal AML/CFT control activities, their oversight, and their effectiveness. - Implementation proposed by the BCU: publish on its website, under "Acerca del BCU", "Normativa", in a new item called “Normativa interna en Prevención del Riesgo de LA/FT,” the BCU’s AML/CFT Risk Prevention Manual that discloses a general description of the internal control framework, subject to prior report from the Legal Department on the relevance of the total or partial publication of the manual. *Source: Central Bank of Uruguay and IMF Staff (IMF mission: September 7–20, 2021).* ### 7. BCU transparency practices in the area of ### 7. BCU transparency practices in the area of monetary and FX policies and operations ### Recommended measures to improve transparency for monetary and FX policies and operations - Offer regular venues (e.g., press conferences) for the media to ask questions and further clarify the rationale for the monetary policy decisions. - Disclose generic information related to the calibration and parameters of the various monetary policy instruments, as well as the outcome on the banks’ overall liquidity position. - Publish generic descriptions of the rationale for FX interventions and the choice of instruments. - Disclose the report sent to the Parliament of the Republic. - Provide additional disclosures on the coordination of monetary and fiscal policies. ### Implementation approach and sequencing - This recommendation can be attended through a Strategic Initiative, starting promptly. - The strategic initiative should enact a protocol in order to regulate the schedule of the meetings with stakeholders and coordination of monetary and fiscal policies, among other specific regulations in this respect. - This recommendation requires deeper analysis to determine disclosures required about FX interventions beyond what we just do in the Monetary Policy Report. ### Enhancing transparency relating to ELA (Emergency Liquidity Assistance) - Enhance BCU transparency practices relating to ELA to enable stakeholders to be prepared to act expediently and with clarity in the event of ELA activation. - Disclose key operational procedures that facilitate the implementation of the requirements of Article 32 of the Organic Charter of the Central Bank, 2008 (OCOT). - Establish a second policy layer within the key operational procedures to identify when and what information is disclosed for ELA. Implementation and analysis notes for ELA transparency - This recommendation requires a deeper analysis since it must include several internal and external agents that constitute the financial system safety net. - In particular, coordination with the regulatory body and with the deposit insurance corporation is necessary. ### Enhancing transparency in financial stability, stress-testing, and macroprudential policies Recommended improvements: - Publish a Financial Stability Report that includes detailed underlying analysis of financial stability risks. - Publish a core set of aggregate financial soundness indicators. - Disclose a comprehensive macroprudential policy framework document, including a clear description of available macroprudential tools and their potential policy effects, as well as the respective roles and responsibilities of the members of the FSC. - Provide a detailed analysis of stress-testing results and their use in guiding policy. Implementation status and notes - The indicators mentioned in (ii) are already produced. - The CB will include this issue in agenda to be implemented during 2022 the aspects mentioned in (i), (iii), and (iv). *Source: 1uryea2022003 - 7. BCU transparency practices in the area of* ### 10. BCU is encouraged to improve the ### 10. BCU is encouraged to improve the dimension of information accessibility across all areas by utilizing the already comprehensive communications framework ### Improved accessibility — specific recommendations and implementation status - Recommendation (i): translate more technical language in reports to simple language suited for different audiences. - Action planned: will evaluate the scope (which and how many reports and audiences) and evaluate the available resources of time and trained personnel to carry out the task in a correct and timely manner. - Recommendation (ii): create searchable document registers for important documents such as Board Resolutions to enable easy access to past issues relevant for current communications. - Action in progress: work to produce a new website searcher that will improve access to different categories of documents. Will begin with Board Resolutions. Will take some time to be available and proved. ### Key governance and transparency findings (Central Bank Transparency Code — Pillar I) - Principle 1.1 Legal Structure - The BCU discloses an updated and consolidated version of the OCOT on its website. - The annual report briefly describes the history of the OCOT; website provides links to other laws and court rulings, but no reference or link to the Constitution is provided. - OCOT contains clear description of objectives, functions, and powers; transitional provisions are limited in time. - Review: Core to well disclosed, but information on other applicable laws and constitutional provisions (appointment, legal protection, scope of Tribunal de Cuentas) is not easily found. - Comment: disclosure could be enhanced by streamlining website information into one section including (i) current objectives and main functions and powers and (ii) description of the general framework including the Constitution and most relevant laws; disclose whether BCU and SSF activities are subject to judicial review. - Principle 1.2 Mandate - Objectives defined in OCOT: price stability and financial and payment system regulation and supervision. - MPRs disclose details of IT regime; no disclosure whether central bank autonomy varies by objective. - Review: Comprehensive — objectives, functions, and powers well disclosed across website, annual report, and MPRs. - Comment: strengthen disclosure on prohibition for BCU to provide credit to government aside from OCOT limits; streamline general mandate information under one section (see Principle 1.1). - Principle 1.3 Autonomy - 1.3.1 Institutional/Operational Autonomy: Constitution and OCOT establish autonomy, but BCU does not disclose whether it or decision-making members are prohibited from seeking/taking instructions from third parties, or whether third-party representatives can attend meetings. - Review: Not Implemented. - Comment: provide information on (i) prohibition on seeking/taking instructions and (ii) attendance of third-party representatives (including government) at meetings. - 1.3.2 Functional Autonomy: OCOT discloses MCC responsibilities; MCC comprises BCU Board, the Minister of Economy and Finances, and two other people designated by the Minister; if no agreement Executive Branch will decide. - Review: Core. - Comment: provide information on what functional autonomy means in practice and clarify role of Executive and Legislative Branch in MCC. - 1.3.3 Personal Autonomy: OCOT discloses eligibility, incompatibilities, remuneration rules; OCOT silent on term of office and dismissal criteria/procedure; BCU states Law 10.917 establishes term lasting the entire political cycle; Constitution establishes dismissal criteria for autonomous entities but not disclosed. - Review: Core. - Comment: publish duration of mandates, appointment and dismissal information in corporate governance website section. - 1.3.4 Financial Autonomy: Constitution and OCOT enshrine financial autonomy; Articles 8, 9, 45, 47, 50, 51 referenced for capital, reserves, profit distribution, limits on monetary financing, budget adoption and submission, and financial statements preparation. - Financial statements: FY 2020 Note 2 indicates Uruguay Accounting Standards are followed except where they contravene “technical criteria appropriate to the nature of a Central Bank”; exceptions include (i) economic/accounting sectorization scheme of the United Nations System of National Accounts; and (ii) treatment of government securities received as part of the BCU’s recapitalization. - Financial statements submitted to Court of Auditors and published within 120 calendar days from fiscal year-end; external audit opinion and Court of Accounts opinion reference applicable standards. - Review: Expanded — arrangements regulated in OCOT and disclosed in notes to financial statements; financial reporting framework not fully articulated due to undefined meaning of “technical criteria appropriate to the nature of the Central Bank.” - Comments to enhance transparency: - (i) include in Note 2 a description of departures from Uruguay Accounting Standards; - (ii) clarify that Uruguay Accounting Standards have been aligned with the International Financial Reporting Standards (for foreign investors); - (iii) explicitly explain BCU’s financial autonomy rationale and related OCOT provisions in the annual report and Institutional Information section, with links to Board resolutions on creation/use of reserves (Article 9, 2 of OCOT). - Principle 1.4 Decision-Making Arrangement - Website and annual report provide detailed organizational structure, functions of Board, composition of committees, qualifications of Board members, links to charts and regulations. - OCOT establishes decision-making bodies: Board (Article 10), President (Article 13), SSF (Article 33) and committees COMPOM (Article 31), MCC (Article 41), RSC (Article 39); Decree 224/011 established Financial Stability Committee. - Review: Comprehensive. - Comment: include role and composition of MCC and role of Executive and Legislative Branch in MCC on website and/or Annual Report. - Principle 1.5 Risk Management - Overall: Review Not implemented; see 1.5.1 and 1.5.2. - 1.5.1 Risk Exposure: - OCOT Articles 26, 28, 32 define main financial operations and reserve management mandate. - FY 2020 Financial Statements Note 31 (Risk Management Practices) discloses principal financial (credit, market, liquidity) and operational risks, tranche descriptions for foreign reserve assets, exposures and limits, and market risk quantified with Value at Risk calculated for individual tranches/portfolios and aggregate portfolio. - Foreign reserves represent 80 percent of the BCU’s total assets. - Annual Report 2020 provides very limited information on key risks; mentions information security steps during COVID-19. - Review: Core — comprehensive disclosures on foreign reserve risks in FY 2020 Financial Statements; annual report lacks high-level overview of key risks, mapping to mandate, risk statement, and key developments. - Comment: include in annual report a section with (i) high-level overview of key risks (financial, operational, legal); (ii) mapping to mandate/objectives; (iii) a risk statement; and (iv) key developments — or publish separately and reference in annual report. - 1.5.2 Risk Framework: - Risk governance and oversight arrangements are not defined in OCOT nor disclosed in annual report, financial statements, or website except for high-level limits/methodologies for foreign reserves in Note 31. - Review: Not implemented. - Comments: publish risk governance (responsibilities, bodies/units), process of continuous identification and evaluation of risks, risk strategies (avoidance, mitigation, transfer), key tools/internal controls for operational risks; consider disclosing internal regulations on risk oversight, developments in risk framework, and high-level crisis policies (e.g., lender of last resort). - Principle 1.6 Accountability Framework - 1.6.1 Arrangements: - External audit: Article 51 requires financial statements prepared “according to technical criteria appropriate to the nature of the Central Bank,” externally audited, submitted to Executive Branch within three months of fiscal year-end; financial statements submitted to Court of Auditors and published within 120 calendar days as per Article 191 and Article 13 (E) of OCOT. - OCOT lacks clarity on applicable financial reporting framework, appointment of external auditors, and applicable auditing standards. - In practice external audit firm appointed by Board for three years (one-year extension possible); auditors’ opinion references International Standards on Auditing; Court of Accounts references INTOSAI standards. - Internal audit: Article 22 provides for Internal Auditor-General Inspector appointed by Board without term limit; duties outlined but reporting line to AC, appointment/dismissal criteria, and adherence to audit standards not disclosed. - Audit Committee (AC) established by Board resolution RD/11/2014: members appointed by Board, comprise a Deputy Governor (chair) and two independent members nominated by University of Uruguay; independent members appointed for maximum three years; AC reports bi-monthly and prepares an annual report. - Review: Core — practices exist but OCOT and public disclosures lack certain clarifications; AC not mentioned in 2020 Annual Report or FY 2020 Financial Statements and names of AC members not published. - Comments to improve transparency: - (i) clarify accounting framework in financial statements; (ii) publish terms of appointment and rotation requirements for external auditors and independence/reputation/experience requirements; (iii) publish applicable auditing standards. - Internal audit: publish criteria for appointment/dismissal of Internal Auditor-General Inspector, reporting line to AC and Board, and Internal Audit charter. - AC: explain role and composition in governance section, publish names and appointment terms, include AC in annual report and financial statements. - 1.6.2 Tools: - FY 2020 financial statements prepared on robust reporting standards (Uruguay Accounting Standards aligned with IFRS) with some exceptions (see 1.3.4 and Note 2). - Financial statements accompanied by external audit opinion and Court of Auditors opinion referencing applicable standards; finalized within three months and published within 120 days. - Internal audit function role specified in OCOT but not featured in annual report, financial statements, or governance website; mentions of Internal Audit quality certifications (2014; recertification) without context. - AC not featured in periodic publications; AC’s report on financial statements is public information but only available upon request. - Review: Core — financial statements comprehensive; internal audit and AC lack public visibility. - Comments: enhance Note 2, include annual report section on use of resources, publish internal audit information (charter, independence rules, reporting lines, activities), publish AC composition, meetings, and activities. - Principle 1.6.3 Anti-corruption Measures and Code of Conduct - Applicable laws: Law 19.823 (Code of Ethics in Public Service, 2019) and Law 17.060 apply to BCU officials; Constitution and Penal Code provisions also apply. - BCU Code of Ethics (2010) defines ethical principles and applies to anyone performing a function or providing a service to BCU; Code disclosed in Spanish as part of consolidated Board Resolutions (“Dec. 2974”). - OCOT discloses incompatibilities/ineligibilities for Board members (Articles 15, 17; Articles 18–21). - Statute for Officials describes duties, confidentiality, and prohibitions; available on website. - Resolution RD/121/2012 and other materials on external activities exist but may be hard to find due to website search limitations. - Ethics Committee established in Code of Ethics (Articles 9–10) with composition and responsibilities; internal handling functions exist but are not publicly disclosed. - Review: Core — national anti-corruption legislation applies; BCU documents disclose general requirements on conduct but lack clarity on legal definitions (corruption offenses, conflicts of interest, significant financial interests), rules on gifts/favors, abstention rules, and cooling-off periods. - Comments: provide direct link to Code of Ethics as a separate clearly titled document; create dedicated anti-corruption webpage linking all applicable legislation and explicitly state Law 19.823 represents BCU’s Code of Conduct; disclose functioning and activities of Ethics Committee and internal control measures. - Principle 1.6.4 Human Capital Management - 2020 Annual Report references equal opportunities, human resources management, skills-based model, Advisory Committee on Personnel Issues, Trade Union, and mixed performance evaluation system. - 2021-2025 Strategic Plan includes initiatives for digital transformation of human capital management. - Website includes staff development reports, performance evaluation descriptions, biennial diversity and inclusion report, and external recruitment transparency tools (vacancies, regulations, Manual of Competencies). - Review: Expanded. - Comments: include in annual report (i) staff turnover data; (ii) leadership and succession plan; and (iii) policy on attracting, promoting, and retaining employees. ### Communication and information access (Principle 1.7 and 1.8) - Principle 1.7 Communication (arrangement and strategy/tools) - OCOT Article 7(H) establishes fostering education and economic/financial culture; Law 18.381 (Access to public information) and Decree No.232/2010 apply. - Board Resolution D-26-2019 delegates SSF to determine access-to-information process for delegated functions; Department of Institutional Communication must do monthly updates per Law 18.381. - BCU publishes organizational structure, internal public communication principles, and designates a "single official voice" (Chairman of Board); Department of Institutional Communication disseminates official information. - Target audiences and tools: BCU Educa financial education, annual conferences, presentations, publications, press releases, interviews, social media, mailing to foreign investors (from 2020) with English versions of COPOM Communiqué and Minutes. - Publications calendar: four MPRs (March, June, September, December) and eight monetary policy meetings (January, March, May, June, July, September, October, December); minutes published three days after meetings; calendar and recent publications prominently on homepage. - Repository/archives: website includes last 20 years of publications; physical archive accessible by electronic request but process not disclosed online. - Access to information system: platform and guidelines available on website; BCU resolves access requests in 20 business days (extendable by 20 business days); if period expires positive silence applies. - Review: Comprehensive. - Comments: encourage creation of new tabs for “Reports and Publications” with historical publications and archived documents; disclose process for accessing institutional archive; separate reports/publications from calendar; improve website search tool for user friendliness. - Principle 1.8 Confidentiality - OCOT Articles 20 and 21 establish secrecy and confidentiality regime; Article 55 empowers BCU to request confidential information from legal persons. - Law 18.381 classifies information into public, restricted, confidential, and secret; restricted information subject to 15 years restriction extendable by 15 years; confidential retains character indefinitely. - BCU Administrative Regulation No. D-337 (2017) provides an additional "restricted access" category for staff. - Determination of classified information made by Board of Directors; Resolution D/246/2020 applies institution-wide; Resolution D/26/2019 delegates SSF responsibility for access requests under its remit. - Review: Expanded — legal framework published but not well explained for public. - Comment: explain nature and context for updates to confidentiality framework on website. ### Selected operational and timing facts preserved from source - FY 2020 Financial Statements: Note 31 (Risk Management Practices); Note 2 (Significant Accounting Policies). - Foreign reserves represent 80 percent of the BCU’s total assets. - Monetary policy inflation target: currently around 5 percent, within a tolerance range of plus or minus two percentage points. - Budget adoption deadline by Board: by June 30 at the latest (Article 50 of OCOT). - Financial statements submission: submitted to Executive Branch for information within three months after the end of the financial year (Article 51 of OCOT); published within 120 calendar days from fiscal year-end (Article 191 of Constitution and Article 13 (E) of OCOT). - COPOM publications: communiqué same day as meeting; COPOM minute within 72 hours; MPR published three weeks after each end-of-quarter COPOM. - Publications and meeting calendar: MPRs in March, June, September, December; eight monetary policy meetings in January, March, May, June, July, September, October, and December. - Access to information response time: 20 business days, extendable by another 20 business days (Article 15 of Law 18.381); petition decision within 120 days if complaint relates to petition of a holder of legitimate interest (Article 318 of the Constitution). *Italic: Source — Central Bank Transparency Code—Detailed Review Report for the Central Bank of Uruguay (excerpts provided).* ### 2012. https://www.bcu.gub.uy/Acerca-de-BCU/Resoluciones%20de%20Directorio/dec_3066.pdf ### 1uryea2022003 - 2012. https://www.bcu.gub.uy/Acerca-de-BCU/Resoluciones%20de%20Directorio/dec_3066.pdf ### Reserve management: objectives, governance, and disclosures - The BCU’s Board of Directors, through COMPAR, has approved investment guidelines that contemplate tolerable levels for credit risk, market risk, liquidity risk, and operating risk. - Broad risk categories are discussed in the quarterly Reserve Management Report; specific details on risk exposures and investment benchmarks attributed to foreign reserves management are discussed in the Notes of the annual Audited Financial Statement. - The review of reserve adequacy is disclosed technically in Working Paper https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/15.2011.pdf and summarized in the quarterly MPR for Q4 2020, pp. 28–29 (https://www.bcu.gub.uy/Politica-Economica-y-Mercados/Reportes%20de%20Poltica%20Monetaria/pepmam04i1220.pdf). - Review commentary: - The BCU discloses objectives, governance, oversight responsibility, tolerable risk levels, investment structure and risk limits. - The basis for reserve management tranches and the size for respective tranches are not disclosed. - The BCU discloses how reserve management interacts with foreign exchange management and debt payments. ### Policy formulation, decision-making, and transparency (Principles 2.4.2–2.4.3) - The Reserve Management Report defines key elements of policy formulation and decision-making authority for reserves management; policy decisions on FX reserves composition are discussed quarterly and tolerable risk exposures in the annual Financial Statement. - Allocation of responsibilities for investment and oversight is outlined in the Reserve Management Report. - Minutes of the Reserves Management Policy Committee and the Investment Committee are not published due to strategic content risks; minutes of COMPAR and COMINV are classified as “restricted information” under Article 9 of Law 18.381. - Review comments / recommended improvements: - Publish ex-post key assumptions and methods motivating investment decisions for the reporting period. - Publish assessments that determine strategic allocation of reserves into tranches and their respective size limits. - Disclose criteria for identification of eligible assets for the reserve portfolio and for respective tranches. ### Macroprudential framework, decisions, and analysis (Principles 2.5.1–2.5.3) - Legal and institutional basis: - The OCOT provides a broad mandate to “regulate and supervise payment and financial systems in order to promote soundness, solvency, efficiency and development.” (Article 3B). - Article 34 describes supervised entities; Article 35 enumerates powers delegated to the SSF. - The OCOT and Strategic Framework of the SSF are published on the BCU website; the Operational Framework of the SSF provides limited additional conceptual detail. - Inter-agency arrangements: - Decree 224/011 establishes the external FSC (BCU, MOEF, COPAB, SSF) with functions to propose strategies for managing financial system risks. - Board Resolution D/96/2019 created an internal FSC to support the external FSC. - Documentation describing objectives, instruments, strategy, and agency responsibilities within a comprehensive framework is not published. - Disclosure of macroprudential policy decisions: - The SSF implements macroprudential policies and discloses the process of issuance of prudential measures and an Action Plan for additional prudential tools; policy decisions are published on the BCU website. - Supporting analysis and public information gaps: - The SSF prepares an annual Report on the Financial System (RFS), largely descriptive. - A Financial Stability Report is prepared for each FSC meeting but is routinely classified as “reserved” and not public. - Global stress test results are published annually in the Financial System Report but not discussed in macroprudential context. - A “Risk Map” methodology has been published, but its current status is not routinely disclosed. - Review finding: Not implemented (for supporting analysis in macroprudential policy). - Recommendations: - Make a version of the periodic Financial Stability Report available publicly with analysis of financial stability issues and how macroprudential tools are expected to mitigate risk. - Publish an aggregated set of core financial soundness indicators regularly under a BCU heading. ### Emergency Liquidity Assistance (ELA) (Principle 2.7) - Key features disclosed in the OCOT (Article 32): - Eligibility: Financial intermediation institutions. - Collateral: Letters of credit, coupons, promissory notes issued or delivered with commercial, industrial, or agricultural purposes maturing within 180 days including two or more authorized signatures, of which at least one is that of a financial intermediary. - Decision making process: - (i) terms and conditions determined by unanimous vote of BCU Board members (ELA cannot exceed one and half times the amount of its net assets); or - (ii) decision making process also involving the SFF and the Bank Savings Protection Corporation (COPAB) that may request the Bank’s Board to limit liquidity provision to percentages below 50 percent of the recipient’s net assets. - The tripartite Memorandum of Understanding (MOU) between the BCU, the SSF and COPAB for Article 32 implementation is not published. - Review commentary / recommendations: - Disclose an operational framework that distinguishes bilateral vs. market-wide liquidity support; provides conditionality and forward-looking solvency criteria; outlines supervisory intrusion and mobilization of unconventional collateral (credit claims); and specifies coordination procedures across agencies and within the BCU for ELA activation. ### AML/CFT supervision and internal control framework (Principle 2.10) - Legal and institutional arrangements: - OCOT designates the SSF as supervisor of specified “financial system entities”; Article 35 empowers the SSF to issue rules to prevent and control money laundering and terrorist financing and to carry out related activities. - The Intendency for Financial Services (IFS) within the SSF is responsible for AML/CFT supervision. - The Operational Framework and Strategic Framework of the SSF are disclosed on the BCU website; the 2017 Minimum Management Standards (Articles 67–74) set mechanisms for independent and periodic review of ML/TF risk management and reporting to the Board and Senior Management. - Disclosures and gaps: - The BCU discloses an overview of AML/CFT supervisory policies and powers via OCOT, Operational Framework, Strategic Framework, and Minimum Management Standards. - The BCU does not disclose detailed information on how it assesses ML/TF risks of supervised institutions that would define supervisory policies. - The BCU does not publicly disclose a description of its internal AML/CFT control framework; the AML/CFT Risk Prevention Manual exists but is not publicly available (financial counterparties can request a copy, no public link). - The Compliance Officer prepares quarterly reports and an annual report to the Board, but these reports are not publicly available. - Review finding: Core (disclosures of overview exist, internal control details not disclosed). - Recommendation: - Disclose a more detailed description of the internal AML/CFT control framework on the BCU website, explain legal provisions for confidentiality, and, absent confidentiality constraints, publish roles, activities, and outcomes related to AML/CFT as part of accountability. ### Consumer protection, data privacy, and dispute resolution (Principle 2.11) - Legal and institutional basis: - Article 35 of the OCOT and Law 17.250 establish the BCU/SSF role and competencies in consumer protection. - The SSF discloses consumer protection policies in its Strategic Framework and the BCU’s Strategic Plan for 2020-2028 (Strategic Line LE3.1; Action Lines LA 3.1.1, LA 3.1.2, LA 3.1.3). - Regulatory framework and transparency: - SSF issues regulations on consumer protection covering principles, code of good practices, attention to claims, contract conditions, and abusive clauses. - Regulations compiled in Recopilación de Normas de Regulación y Control del Sistema Financiero (Libro IV—Protección al Usuario del Sistema Financiero; Libro V—Transparencia y Conductas de Mercado). - Compiled circulars (“Recopilación de Normas”) are published daily on the website. - Data protection and privacy: - Law 18.331 regulates Personal Data Protection and “Habeas Data”; implemented by AGESIC (Executive branch agency). Financial institutions are subject to Law 18.331. - SSF complies with personal data protection law in processing administrative files and in publication activities related to consumer protection. - Users may file complaints with SSF (or AGESIC) regarding non-compliance with personal data protection law; the Usuario Financiero webpage could better link to the data protection law. - Dispute resolution and consumer complaints: - Complaint defined as “a notice or knowledge that the user makes to the BCU, related to an event presumed as an infringement of the rules that regulate supervised institutions.” - The SSF handles complaints and inquiries from financial services users; cooperation agreement with the Consumer Defense Area (MOEF) is referenced in the Memoria Annual, p. 7. - Review comments: - The BCU’s mandate for consumer protection is clearly established; the BCU has regulatory power and processes for complaint handling and redress that form the basis for sanctions. - The BCU promotes public participation in rulemaking and actively discloses information to stakeholders. ### Monetary policy instruments and liquidity operations (Principle 3.1.1) - The operational framework for systemic liquidity management, including tools and activation, is well understood by BCU counterparties. - Transparency in implementation is supported by reliance on the money market platform operated by the Stock Exchange Market of Uruguay—BEVSA. - Since September 2020, relevant disclosures are available on the BCU website (see Principle 2.1.1 for website references). *Italic: International Monetary Fund — URUGUAY country report excerpts as provided in the source content.* ### references), the current monetary policy in Uruguay is identified as an IT framework based on an ### 1uryea2022003 - references), the current monetary policy in Uruguay is identified as an IT framework based on an ### Monetary policy framework and operational target - Monetary regime: identified as an IT framework based on an interest rate operating target. - Operational target: the overnight interbank money market rate; monetary policy seeks transmission of this rate to the rest of the interest rates consistent with the inflation objective. - Inflation target: aims for 5 percent annual inflation in a horizon of two years with a 2 percent deviation; this target and range will change in September 2022 to a 4.5 percent annual inflation target and a deviation of 1.5 percent. - Accountability: annual report to Parliament sent on March 1 (Memoria Annual) describing conduct and output of central bank actions; this report is prepared and submitted on March 1 but is not published on the BCU website. ### Instruments, counterparties, and market access - Instruments disclosed: - Open market operations (OMOs) - Standing facilities (standing deposit facility and standing credit/Lombard facility) - Reserve requirements as a direct instrument of monetary policy - Monetary regulation bills / central bank bills (Letras de Regulacion Monetaria - LRM) at tenors 30, 90, 180, and 360 days - Secondary-market OMOs for securities issued by government, public/private entities, and BCU securities (maturities from overnight to 29 days; instruments denominated in Uruguayan pesos and in indexed units) - Standing facility rates disclosed: - Standing deposit facility: currently at 1 percent - Standing credit facility / Lombard Facility: currently at 15 percent - Reserve requirements: - Regulatory regime disclosed in Libro XIV of the BCU “recopilacion de normas de operaciones” - A considerable reduction in reserve requirements in domestic currency was recently implemented - Objective includes generating an asymmetry between reserve requirements in foreign currency and domestic currency - Primary market access: - Competitive tranche: BCU issues monetary regulation bills in the competitive tranche to banks that are Primary Dealers (per Primary Dealer Program Regulations) - Non-competitive tranche: amount is a percentage of the amount tendered—currently 20 percent—available to institutions that are not primary dealers (rest of banks, pension funds, insurance companies, brokers, other financial institutions) - List and changes of Primary Dealers publicly disclosed on BCU webpage - Market platform: OMOs and standing facilities conducted via money market platform operated by BEVSA; counterparties are those allowed to operate on the BEVSA platform - Transparency comments / gaps: - Disclosure of operational framework would be enhanced by a generic description on the BCU website including reliance on the BEVSA platform - Disclosure could expand to include (i) how reserve requirement levels are determined to achieve objectives; (ii) all parameters of reserve requirements including averaging provisions; (iii) determination of size and tenor for OMO calibration including auctioning method, haircuts; (iv) use of forward guidance regarding operating target evolution - Eligibility criteria and terms/conditions for counterparties in OMOs and standing facilities are not fully disclosed for the public at large ### Monetary operations, liquidity management and outcomes - Operational objective and reporting: - Operational objective (one day money market interest rate) published daily - Daily amounts operated in the one day money market published, distinguishing operations with central bank counterparties and others - MPR analyzes liquidity management, money and exchange rate markets, interest rates; compares observed one-day money market interest rate with operational target - MPR provides detailed information on outcomes of liquidity-providing and absorbing operations including emissions of BCU bills on primary market, OMOs, fine tuning operations (instrumentos de sintonia fina - ISF), interbank turnover, yield curve, monetary aggregates, banks’ balances with BCU, money multiplier, and free reserves maintained by banks - Daily volumes and interest rates of monetary operations disclosed on BCU website; monthly data also provided - Transparency comment: - Disclosure of realized autonomous liquidity factors would enhance transparency ### Foreign exchange management and interventions - Exchange rate regime and FX intervention policy: - De jure floating exchange rate regime; BCU does not have a policy of routine intervention or set intervention criteria - BCU may intervene to avoid sudden fluctuations and to smooth trends; interventions aim to reduce excessive volatility that affects inflationary expectations and uncertainty - Modalities of interventions: (i) direct interventions/auctions in the spot market; (ii) interventions in futures; (iii) interventions in NDF or full delivery forwards - BCU intervenes exclusively through the FX market platform operated by BEVSA - Disclosure of FX operations: - Conditions for financial institutions to participate in the FX market are disclosed in various communications on the BCU website - Every time FX intervention is activated the BCU discloses daily intervention levels by type of instruments used (spot, forward, NDF) on its website; a summary is presented in the MPR - Quarterly aggregated amounts of FX interventions published in the MPR distinguishing operations with central government and spot or forward interventions over the last three years - Coverage and market participants: - BCU is the FX market regulator; defines eligible participants and transaction types by institution profile (Libro I and II) - List of authorized institutions and subcategories disclosed on BCU website; BEVSA publishes conduct and sanction rules for market participants - Transparency comments: - Generic description on BCU website of rationale for choice among FX instruments would enhance public understanding - Accessibility could be improved by publishing a consolidated list with counts for various categories of authorized institutions - Generic explanations regarding rationale for FX intervention given the market microstructure (limited number of participants, concentrated market with few transactions) would improve transparency ### Foreign exchange reserves and reserve management - Reserve management principles and structure: - OCOT: BCU will manage external reserves according to international practices accounting for risk, liquidity, and profitability - Two-arm approach: funds managed by BCU and funds managed by external administrators - Funds and investment horizons: - Liquidity Fund and Precautionary Fund: focus on liquidity and security; maximum investment horizon 6 months - Investment Fund and Special Fund: less focus on liquidity and security; limits of risks outlined by Reserve Management Policy Committee observed - For externally managed portfolio, eligible assets include mortgage-backed securities backed by the Government of US or issued by sponsored agencies, and corporate bonds for issuers rated at a minimum of A- - Disclosure and reporting: - Quarterly Reserve Management Report discloses eligible assets for externally managed portfolios and aggregated exposures - Annual Financial Statements disclose rules and methods for selection of counterparties and aggregate exposures; investment limits detailed across five categories - Quarterly Reserve Management Report and annual audited Financial Statements published on BCU website; reserve assets level and composition disclosed; short-term liabilities disclosed weekly - Reserve adequacy: - Most recent review in March 2021 disclosed reserve levels assessed to be adequate, even in context of complete closure of capital markets - Transparency comments / gaps: - Eligible instruments and associated risks are not disclosed for the main funds indicated in the strategic tranches - Publishing minimum criteria for selection of external fund managers and other service providers could enhance transparency - BCU does not disclose information on liquidity risks arising from reserve management activities - Additional public information on performance relative to benchmarks could be provided (e.g., beyond interest income broken into accrued and realized) ### Financial stability reviews and stress testing - Financial Stability Reviews: - FSC press releases communicate overall financial stability assessment and some information on emerging risks - Annual Report on the Financial System is descriptive with limited risk assessment; includes global stress testing results - Comment: a regularly published Financial Stability Report with a comprehensive review of main risks would enhance transparency - Stress testing framework and disclosure: - BCU discloses a detailed guide for individual banks for bottom-up stress testing covering capital adequacy, objectives, regulatory submission guidance, and macroeconomic scenario assumptions - Annual Report on the Financial Sector publishes aggregate assessment of stress-test results and limited description of objectives and design - Coverage: stress tests implied to be limited to banks; number of institutions covered not disclosed - Use of results: guide indicates adverse individual bank results lead to policy follow-up with the bank; BCU does not disclose how aggregate results affect policy decisions - Transparency comments: - Publish a global stress-testing framework (including any top-down tests) and more detailed disclosure/analysis of results - Disclose explicit list/number of institutions covered and how aggregate results feed into macroprudential policy (e.g., countercyclical capital buffer) ### Macroprudential policy and implementation - Institutional design and disclosures: - Macroprudential tools are part of SSF prudential toolkit; some tools serve both micro- and macroprudential purposes but are not explicitly classified - Countercyclical capital buffer implementation provides an example of rigorous design and disclosure (references to specific circulars and communiqués) - Consultation process prescribed for policy measures of SSF - Enforcement: - Enforcement mechanisms authorized in the OCOT and explained in SSF Operational Framework; system of sanctions of the SSF disclosed in general terms - Transparency comments / gaps: - To enhance transparency, instruments could be classified according to macroprudential use with specific objectives and scope listed on BCU website - Publish comments on policy tools and BCU responses during consultation - No ex-post evaluations of macroprudential policies are disclosed; BCU should publish ex-post evaluations and related background research ### Emergency liquidity assistance (ELA) and resolution - ELA disclosures and practice: - No disclosures observed on ongoing provision of ELA; ELA has not been activated for the past 19 years at the time of the domestic financial crisis - ELA framework (Article 32 of BCU OPCOT) does not allow disclosure of provision of ELA support - Comments: - BCU should consider context and timing for disclosure of ELA operations; while confidentiality is appropriate while ongoing, ELA operations should be disclosed posteriori (e.g., in Annual Report) in coordination with external auditors, and the BCU should be ready to communicate proactively if balance sheet transparency makes operations evident ### Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) - Public disclosures: - BCU’s 2020 UIAF Annual Report discloses annual statistics on completion rates of off-site and onsite AML/CFT supervisory activities and number of suspicious transaction reports - Monthly summaries of sanctions imposed by SSF (including AML/CFT breaches) published via Resolutions; complete Resolution disclosed unless classified confidential under Article 5 of Law 18.381 - BCU’s Transparency webpage discloses Board Resolution RD 246-2020 governing classification of reserved and confidential matters; RD 246-2020 available but not searchable and not linked from SSF sanctions webpage - Internal AML/CFT controls: - Information on internal AML/CFT control activities and human/technical resources is available internally but not publicly disclosed - Internal audit reports assessing effectiveness presented to Board of Directors but findings are not disclosed publicly - Transparency comments / gaps: - Enable search/filtering of sanctions by type (e.g., AML/CFT) - Disclose implementation of remedial actions where possible, allowing case-by-case exceptions when disclosure jeopardizes stability or investigations - Disclose findings on effectiveness of internal AML/CFT controls via internal independent audit or third-party auditor ### Consumer protection and financial user services - Institutional arrangements and disclosures: - SSF operational framework discloses tasks on consumer protection - SSF regulation requires institutions to inform users they can file complaints to BCU (example: article 327 of Recopilación de Normas de Regulación del Sistema Financiero) - Complaint procedures: a 15-day period must pass after initial complaint to the financial institution before lodging with BCU; processing initiated within a week; response times established in BCU administrative regulation (Articles 123 and 125) - Channels: email (ssfpublico@bcu.gub.uy), in person, BCU website portal “Usuario Financiero,” or by note; queries answered in 48 hours in writing - Resolutions and sanctions published monthly; resolutions published without complainant names per data privacy laws - Consumer education and outreach: - Portal del Usuario Financiero (https://usuariofinanciero.bcu.gub.uy) - Chatbot under Portal del Usuario Financiero - Publicity campaigns (e.g., secure operations) - Educational activity “World Investor Week” - Disclosure of outcomes: - SSF publishes annual report “Atención al Usuario Financiero” with functions and results - Portal publishes statistics on complaints and measures taken - Memoria Annual contains outcomes and activities related to consumer protection - Comments: - BCU-SSF discloses a range of measures to support transparency on consumer protection; continued focus on financial education for vulnerable groups recommended ### Institutional relations with government, domestic agencies, and foreign agencies - Legal and institutional frameworks: - OCOT establishes advisory role to Executive (Article 40) and creates Monetary and Currency Council (MCC) (Article 41) comprising Minister of Finance and Economy and three BCU Board members; MCC duties include sharing information and establishing price stability aims; if no agreement, the Executive Branch takes final resolution - Debt Coordination Committee (PDCC) created by MCC resolution; headed by BCU manager of Economic Policy and Markets and Director of Debt Management Unit of MOEF; meets four times a year and its resolutions published on BCU webpage - BCU accountable to legislative branch; annual written report to General Assembly per Article 46 of OCOT; Annual Report (Memoria) published - Financial Stability Committee (FSC) created by Decree 224/011 (2011) comprising Minister of Economy and Finance, President of BCU, Superintendent of Financial Services, President of COPAB - COPAB coordination with BCU established by Law 18.401; MoU with COPAB is confidential - Disclosure of interactions and transactions: - BCU discloses financial transactions with government in various reports and statistics (MPR, monetary base reports, financial statements); issuance calendar for government securities published; BCU acts as fiscal agent and banker to government per OCOT (Article 7) - Credit to government governed by Article 45: Bank will give loans to Executive Branch only through purchase of public issuing securities; such loans shall not exceed 10% of National Budget expenditures effectively carried out in previous fiscal year, nor exceed holdings at any time - Some MoUs are classified confidential; press releases of joint actions with MOEF are published but not always easily accessible - Interaction with foreign agencies: - OCOT (Article 7, F) empowers BCU to represent government before international financial institutions and execute related transactions - BCU discloses memberships and interactions with international organizations, including links to statutes or agreements; MoUs and agreements published where applicable - Transparency comments / gaps: - Operational procedures and rules of MCC and PDCC not fully disclosed on BCU website; MoUs with public institutions are not disclosed though press releases exist - BCU should publish Memoria Annual (report sent to Parliament) on website to enhance transparency and accountability - Disclose in accessible manner general guidelines on BCU role as fiscal agent, terms and conditions of financial transactions with government, and operational procedures for interactions with MOEF - Create a designated web area consolidating relations with government and domestic financial agencies and publish procedures, minutes or aggregated outcomes where confidentiality allows *Source: IMF content unit 1uryea2022003 (excerpts provided).* ### Appendix I. List of BCU Board Members, Executives and ### Appendix I. List of BCU Board Members, Executives and Departments, and External Stakeholders ### BCU Board and Executive Management - President Diego Labat BCU President and Board Chair - Mr. Washington Ribiero Vice-President - Mr. Daniel Artecona Manager, Legal Advisory Unit - Mr. Juan Pedro Cantera Superintendent of Financial Services - Mr. Jorge Christy Secretary General - Gerardo Licandro Manager, Economic Advice - Mr. Walter Morales Manager, General Inspectorate and Internal Audit - Mr. Adolfo Sarmiento Manager, Economic Policy and Markets ### BCU Departments and Committees - Accounting and Budget Department - Audit Committee - Compliance Officer - Communications Department - Economic Policy and Markets Division - Financial Stability Department - Human Capital Management - Internal Audit Department - Internal Financial Stability Committee - Legal Department - Monetary Policy Committee - Reserves Management Department - Strategic Planning and Organizational Development Department - Superintendency of Financial Services ### External Stakeholder Institutions - La Asociacion de Bancos del Uruguay - Banco de la República Oriental del Uruguay (BROU) - Bank Savings Protection Corporation (COPAB) - Canal 10 TV/Radio Carve—media/journalist - Center for the Study of Economic and Social Affairs (CERES)—Non-profit research center specializing in public bodies - Chamber of Industry (manufacturing companies account for approximately 75 percent of goods exports in the country) - El Observador—media/journalist - El Pais—media/journalist - FITCH Rating Agency - Instituto de Economía Universidad de la República - Ministry of Economy and Finance—Debt Office - Santander Bank *Source: Appendix I. List of BCU Board Members, Executives and Departments, and External Stakeholders (PDF).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1uryea2022003.pdf_