Emerging Markets Rates and Currencies Handbook

Colombia (COP - Colombian Peso) Citi in Colombia Established in 1916, Citi Colombia serves most multinational and top domestic companies. With its financial strength and unique transactional platforms, Citi offers foreign trade, FX trading, cash management and offshore investment products. Main FX clients are corporates. On the investor side, asset managers stick to using Forwards and trade the SETFX or TRM. The regulatory requirement on asset managers to send daily MTM restricts them to Forwards. Holding companies and banks execute some options. Market Overview The Colombian constitution grants the Central Bank administrative and financial autonomy and law 31 from 1992 attributes to the Central Bank, Banco de la Republica (BanRep), the responsibility of formulating monetary and foreign exchange policies and regulations. The BanRep manages the Colombian Peso under a free float regime and does not allow free convertibility of the currency. The BanRep actively participates in the local FX market to ensure adequate levels of international reserves accumulation, to regulate credit conditions and to reduce market volatility and excessive appreciation/depreciation. Historically, most of the FX transactions were done by oil corporations but recently their activity has been reduced. Convertibility The peso is not convertible. Foreigners can participate through the NDF market. Interest Rate • The Colombian monetary policy rate is known as the Intervention Rate, which is defined by the Board of Directors of the BanRep in each of its eight annual meetings. • The Intervention Rate is defined as the minimum interest rate that BanRep charges financial entities through Open Market Operations (OMAs). • OMAs constitute the main monetary policy intervention mechanism used by BanRep to affect the amount of money circulating in the economy. • The execution of OMAs is carried out under expansion or contraction Repo auctions using the Intervention Rate as reference. 198