## Colombia—Assessment of Financial Stability Report ## Source details **Canonical URL:** [Colombia—Assessment of Financial Stability Report](https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea2023011.pdf) ## Other formats - [Markdown version](/-/media/files/publications/hls/2023/english/hlsea2023011.pdf.md) - [Structured JSON version](/-/media/files/publications/hls/2023/english/hlsea2023011.pdf.json) --- ### Background - The Financial Stability Report (FSR) of the Banco de la República of Colombia (BR) is a biannual report providing broad coverage of the macroeconomic environment and assessment of risks in the financial system. - The FSR is one of the main sources of data and information on financial stability in Colombia and is presented publicly at the time of publication. - The FSR is presented to the financial security network, whose members include the BR, Financial Superintendency of Colombia, Fogafin and the Ministry of Finance. ### Summary of Findings - The current FSR structure (macroeconomic environment, developments in risks and vulnerabilities, stress tests, and changes in financial regulations) provides consistent information and assessment and generally works well. - The FSR typically contains 4-7 boxes on thematic topics, allowing flexibility to cover topical and/or emerging issues. - As new risks become more permanent and related data more available, the BR could take stock and update the FSR structure in the medium term. - Data and analytical development: - Continue compiling granular data, particularly on household sector indebtedness and financial conglomerates. - Published data in and with the FSR is highly valued, but the time lag constrains timely assessment of fast-changing risks. - Consider releasing a short interim update between FSR cycles focused on data with a brief write-up on macroeconomic outlook; such updates could use preliminary or more aggregate data and draw on existing publications (e.g., the monetary policy report). - Consider including more up-to-date data in the FSR while clearly indicating it is preliminary. - Streamline internal weekly/monthly reports to reduce resource constraints. - Forward-looking analyses: - Continue and expand stress testing and sensitivity analyses of corporate and household sectors and on interconnectedness. - Ensure such analyses are based on and consistent with assumptions in the bank stress test to provide a coherent scenario for resilience assessment. - Given increasing exposure of Colombian financial conglomerates in Central America, focus on examining and understanding financial linkages and potential spillover channels. - Messaging: - Sharpen and make messages on key risks more forward-looking. - Convey a consistent narrative throughout the report by elaborating risk transmission channels and linking identified risks more explicitly to stress test scenarios. - Supplement the newly introduced vulnerability matrix with relevant indicators from the Heatmap to substantiate assessments and enhance narrative clarity. - Communication: - Adopt a layered communication approach to adapt key messages to audiences with different technical knowledge levels. - Hold separate briefings for journalists and expert audiences (e.g., financial analysts) to tailor communication. - Enhance “in-reach” within the BR and to the financial regulatory community to foster understanding and structured exchange of views. - Long-term: - Deepen understanding of the channels and interaction between financial stability and monetary policy as the financial system evolves. - Enhance knowledge sharing between financial stability and monetary policy staff and improve information about the sensitivity of vulnerabilities in the FSR to assist monetary policy decision makers. ### Summary of Recommendations - Recommendation list with Priority and Timeframe (Timeframe definitions: Short term: less than 12 months; Medium term: between 12 and 24 months; Long term: more than 24 months.) 1. Structure of Financial Stability Report - Review and update the structure of the Financial Stability Report, taking stock of recurring and relevant issues - Priority: Medium - Timeframe: Medium term 2. Data and Analysis - Consider producing an ‘interim’ update which is focused on data rather than analysis, taking advantage of preliminary and/or less granular data available - Priority: Medium - Timeframe: Medium term 3. Data and Analysis - Continue developing analytical approaches, including on the household sector and financial conglomerates - Priority: High - Timeframe: Short term 4. Data and Analysis - Expand forward-looking analyses, including stress testing and sensitivity analyses of the corporate and household sectors - Priority: High - Timeframe: Medium term 5. Data and Analysis - Streamline internal reports, leveraging the forward-looking analysis in the FSR - Priority: Medium - Timeframe: Medium term 6. Messaging - Enhance the clarity of the messages and make them more forward-looking by reiterating the consistent narrative and elaborating on risk transmission channels throughout the report - Priority: High - Timeframe: Short term 7. Messaging - Link the assumptions for the stress testing scenarios more explicitly with risks discussed in the conjunctural chapters - Priority: High - Timeframe: Medium term 8. Communication - Develop a layered communication approach - Priority: High - Timeframe: Short term 9. Communication - Introduce separate briefings for the media and the expert audience - Priority: High - Timeframe: Short term 10. Communication / Outreach - Enhance the in-reach within the BR and other financial sector authorities to facilitate a more structured exchange of views. - Priority: Medium - Timeframe: Long term 11. Long-term Issues - Develop deeper understanding and knowledge sharing on monetary policy and financial stability interactions - Priority: High - Timeframe: Long term *High-Level Summary Technical Assistance Report — Colombia—Assessment of Financial Stability Report* --- _Source: https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea2023011.pdf_