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From this edition, the Financial Stability Report will have fewer pages with some changes in its structure. The purpose of this change is to present the most relevant facts of the financial system and their implications on the financial stability. This allows displaying the analysis more concisely and clearly, as it will focus on describing the evolution of the variables that have the greatest impact on the performance of the financial system, for estimating then the effect of a possible materialization of these risks on the financial health of the institutions. The changing dynamics of the risks faced by the financial system implies that the content of the Report adopts this new structure; therefore, some analyses and series that were regularly included will not necessarily be in each issue. However, the statistical annex that accompanies the publication of the Report will continue to present the series that were traditionally included, regardless of whether or not they are part of the content of the Report. In this way we expect to contribute in a more comprehensive way to the study and analysis of the stability of the Colombian financial system. Executive Summary During the first half of 2015, the main advanced economies showed a slow recovery on their growth, while emerging economies continued with their slowdown trend. Domestic demand in the United States allowed for stabilization on its average growth for the first half of the year, while other developed economies such as the United Kingdom, the euro zone, and Japan showed a more gradual recovery. On the other hand, the Chinese economy exhibited the lowest growth rate in five years, which has resulted in lower global dynamism. This has led to a fall in prices of the main export goods of some Latin American economies, especially oil, whose price has also responded to a larger global supply. The decrease in the terms of trade of the Latin American economies has had an impact on national income, domestic demand, and growth. This scenario has been reflected in increases in sovereign risk spreads, devaluations of stock indices, and depreciation of the exchange rates of most countries in the region. For Colombia, the fall in oil prices has also led to a decline in the terms of trade, resulting in pressure on the dynamics of national income. Additionally, the lower demand for exports helped to widen the current account deficit. This affected the prospects and economic growth of the country during the first half of 2015. This economic context could have an impact on the payment capacity of debtors and on the valuation of investments, affecting the soundness of the financial system. However, the results of the analysis featured in this edition of the Report show that, facing an adverse scenario, the vulnerability of the financial system in terms of solvency and liquidity is low. The analysis of the current situation of credit institutions (CI) shows that growth of the gross loan portfolio remained relatively stable, as well as the loan portfolio quality indicators, except for microcredit, which showed a decrease in these indicators. Regarding liabilities, traditional sources of funding have lost market share versus non-traditional ones (bonds, money market operations and in the interbank market), but still represent more than 70%. Moreover, the solvency indicator remained relatively stable. As for non-banking financial institutions (NBFI), the slowdown observed during the first six months of 2015 in the real annual growth of the assets total, both in the proprietary and third party position, stands out. The analysis of the main debtors of the financial system shows that indebtedness of the private corporate sector has increased in the last year, mostly driven by an increase in the debt balance with domestic and foreign financial institutions. However, the increase in this latter source of funding has been influenced by the depreciation of the Colombian peso vis-à-vis the US dollar since mid-2014. The financial indicators reflected a favorable behavior with respect to the historical average, except for the profitability indicators; although they were below the average, they have shown improvement in the last year. By economic sector, it is noted that the firms focused on farming, mining and transportation activities recorded the highest levels of risk perception by credit institutions, and the largest increases in default levels with respect to those observed in December 2014. Meanwhile, households have shown an increase in the financial burden, mainly due to growth in the consumer loan portfolio, in which the modalities of credit card, payroll deductible loan, revolving and vehicle loan are those that have reported greater increases in risk indicators. On the side of investments that could be affected by the devaluation in the portfolio of credit institutions and non-banking financial institutions (NBFI), the largest share of public debt securities, variable-yield securities and domestic private debt securities is highlighted. The value of these portfolios fell between February and August 2015, driven by the devaluation in the market of these investments throughout the year. Furthermore, the analysis of the liquidity risk indicator (LRI) shows that all intermediaries showed adequate levels and exhibit a stable behavior. Likewise, the fragility analysis of the financial system associated with the increase in the use of non-traditional funding sources does not evidence a greater exposure to liquidity risk. Stress tests assess the impact of the possible joint materialization of credit and market risks, and reveal that neither the aggregate solvency indicator, nor the liquidity risk indicator (LRI) of the system would be below the established legal limits. The entities that result more individually affected have a low share in the total assets of the credit institutions; therefore, a risk to the financial system as a whole is not observed. José Darío Uribe Governor

En virtud del mandato otorgado por la Constitución Política de Colombia y de acuerdo con lo reglamentado por la Ley 31 de 1992, el Banco de la Repú-blica tiene la responsabilidad de velar por la estabilidad de los precios. El adecuado cumplimiento de esta tarea depende crucialmente del manteni-miento de la estabilidad financiera. La estabilidad financiera se entiende como una condición general en la cual el sistema financiero (establecimientos, mercados e infraestructuras): 1. Evalúa y administra los riesgos financieros de una manera que facilita el desempeño de la economía y la asignación eficiente de los recursos; 2. está en capacidad de absorber, disipar y mitigar de manera autónoma la materialización de los riesgos que pueda surgir como resultado de eventos adversos. Ete Reporte de Estabilidad Financiera cumple el objetivo de presentar la apreciación del Banco de la República sobre el desempeño reciente de los establecimientos de crédito y sus deudores, así como sobre los principales riesgos y vulnerabilidades que podrían tener algún efecto sobre la estabili-dad financiera de la economía colombiana. Con este objetivo se pretende in-formar a los participantes en los mercados financieros y al público, además de promover el debate público sobre las tendencias y los riesgos que atañen al sistema financiero. Los resultados aquí presentados sirven también a la autoridad monetaria como base para la toma de decisiones que permitan promover la estabilidad financiera en el contexto general de los objetivos de estabilidad de precios y estabilidad macroeconómica. Este Reporte se complementa con el Reporte de Sistemas de Pago publicado anualmente por el Banco de la República, en el cual se divulga la labor de seguimiento a las infraestructuras financieras de la economía colombiana.

Aunque las negociaciones de los intermediarios del mercado cambiario (IMC) con el sector real en el mercado de forwards peso-dolar son bajas en comparacion con las operaciones transadas con agentes offshore, es importante entender el comportamiento de dicho sector y su impacto en el mercado cambiario. En este trabajo se evalua si el sector real ha tenido un impacto en la tasa de cambio, analizando la evolucion diaria de su posicion neta en el mercado de forwards peso-dolar. De acuerdo con la evolucion de los montos negociados en el mercado de forwards por parte de los IMC con diferentes contrapartes, se observa que el sector real en algunas ocasiones ha tomado posiciones que parecen ir en sentido contrario a las operaciones negociadas por los agentes offshore, las cuales podrian tener un efecto estabilizador en la tasa de cambio. Mediante modelos EGARCH y VARX-MGARCH se encuentra evidencia de que las posiciones que toma el sector real tienen un impacto sobre la tasa de cambio. Sin embargo, ese efecto no ha sido estable entre 2008 y 2015, y se ha reducido en el tiempo. Igualmente, las posiciones del sector real en el mercado forward no tienen un efecto estabilizador sobre el tipo de cambio pues ante compras netas del offshore en dicho mercado no se encuentra evidencia que el sector real tome una posicion vendedora neta.

Macroprudential policy in Colombia is described along with a discussion of the main challenges faced by the authorities in implementing it and a review of episodes in which macroprudential measures were taken. An overview and some estimates of their effectiveness in preventing the buildup of imbalances, increasing buffers and cushioning downswings are presented.

In this paper we analyze the effects of financial constraints on the exchange rate through the portfolio balance channel. Our contribution is twofold: First, we construct a tractable two-period general equilibrium model in which financial constraints inhibit capital flows. Hence, departures from the uncovered interest rate parity condition are used to explain the effects of sterilized foreign exchange intervention. Second, using high frequency data during 2004-2015, we use a sharp policy discontinuity within Colombian regulatory banking limits to empirically test for the portfolio balance channel. Consistent with our model's postulations, our findings suggest that the effects on the exchange rate are short-lived, and significant only when banking constraints are binding.

The paper examines the bidders behaviour in the Colombian government bond auctions during 2007 for the period in which there is no uncertainty in the supply. Three main ndings are presented. First, in contrast with other treasury auctions (Castellanos [2]), the market clearing price in the Colombian auctions tends to be above the price in the secondary market. I explore this phenomenon and illustrate that a key institutional detail involving a secondary sale contingent on the primary auction may explain this dierence with other auctions. Second, using identiers that allow me to follow individual bidders across auctions I analyze the determinants of the stepwise demands. I nd that predetermined variables explain the number of steps (bid-points) and the quantities. However, bid prices exhibit signicant unexplained variation. Third, for demands that have 3 or more bid-points, 93% of the variability is captured by a linear regression. This result is similar to what Horta csu

We analyse three models to determine the conditions under which reserve requirements are used as a part of an optimal monetary policy framework in an inflation targeting regime. In all cases the Central Bank (CB) minimizes an objective function that depends on deviations of inflation from its target, the output gap and deviations of reserve requirements from its optimal long term level. In a closed economy model we find that optimal monetary policy implies setting reserve requirements at their long term level, while adjusting the policy interest rate to face macroeconomic shocks. Reserve requirements are included in an optimal monetary policy response in an open economy model with the same CB objective function and in a closed economy model in which the CB objective function includes financial stability. The relevance, magnitude and direction of the movements of reserve requirements depend on the parameters of the economy and the shocks that affect it.

Se analizan tres tipos de modelos para determinar cuando, bajo un esquema de inflacion objetivo, el Banco Central (BC) debe utilizar los encajes como una herramienta de politica monetaria optima. En todos los casos el BC busca minimizar una funcion objetivo que consta de las desviaciones de la inflacion de su meta, y del producto y los encajes de sus niveles respectivos de largo plazo. En un modelo de economia cerrada encontramos que la politica monetaria optima es fijar los encajes en su nivel adecuado de largo plazo y ajustar la tasa de interes de politica para enfrentar los distintos choques que afecten a la economia. En un segundo modelo de economia abierta con los mismos objetivos del BC y en otro de economia cerrada en donde en la funcion objetivo del BC incluye adicionalmente la estabilidad financiera, los encajes si forman parte de la respuesta de politica monetaria optima ante choques macroeconomicos. La pertinencia, la magnitud y la direccion del movimiento de estos depende de los parametros de la economia y de los choques a los que esta se enfrente.

El documento tiene como objetivo describir algunos de los elementos fundamentales del mercado interbancario colombiano y del manejo de liquidez por parte del Banco de la Republica (BR). El documento explica las diferencias entre las principales operaciones en este mercado y describe los mecanismos a traves de los cuales el BR suministra liquidez o recoge excesos de la misma en el sistema financiero (SF); entre otros, describe la subasta diaria de expansion realizada por el BR y la determinacion del cupo (monto maximo a prestar al SF) para la misma. Finalmente, el documento presenta un modelo sencillo que recoge algunos de los elementos basicos del mercado interbancario colombiano. Su proposito es servir como punto de referencia inicial para trabajos posteriores.

Desde finales de los anos 80 el sistema financiero colombiano ha experimentado cambios fundamentales acompanados de una 05r volatilidad del entorno en que se desenvuelve la actividad financiera. Como parte del fortalecimiento de la regulacion prudencial, desde el 2000 en Colombia, se esta supervisando el riesgo de mercado medido a traves del Valor en Riesgo (VeR). El VeR se define como la maxima perdida potencial en el valor de un activo o portafolio, dada una probabilidad, debido a cambios en los precios del mercado, en un horizonte de tiempo determinado. Para obtener el VeR de un activo generalmente se supone que los retornos siguen una distribucion normal, sin embargo existe gran evidencia de que esta no se ajusta en forma correcta a la serie de retornos financieros. En este estudio se utiliza la teoria de valor extremo (TVE) para obtener el VeR de 6 activos financieros colombianos utilizando el metodo de Picos sobre un umbral (Peaks over Thresholds (POT)) mostrando que la distribucion normal no se ajusta a la distribucion de los retornos de los activos colombianos. Se modela de forma satisfactoria la distribucion de las series, bajo el supuesto de observaciones independientes e identicamente distribuidas, especialmente en la parte extrema de la distribucion. Se compara el VeR obtenido (VeR TVE) y el VeR bajo el supuesto de distribucion normal con los retornos reales dando como resultado un mejor ajuste del VeR de TVE. En el ultimo examen de desempeno, la hipotesis nula de que el modelo realiza una buena estimacion es rechazada 11 veces por el metodo tradicional (distribucion normal) mientras que el metodo de TVE lo hace 6 veces.