0. Banking and the parallel development in Colombia
Jornada Colombiana, University of St. Gallen
March 28, 2017
Andrés Felipe Marín Salazar
Vice-President
Head, Private Banking Colombia & CA, Credit Suisse

1. Agenda Development of banking in Colombia
Banking today and its main trends
Peace process, tax reform and banking in Colombia
Final remarks

2. Overview of banking in Colombia
Financial system started to grow in the 1950s with specialized entities, e.g. Banco Cafetero, Banco Ganadero
Sector adapted strong AML regulations in the 1980s
In the 1990s, the banking system took a turn to an universal banking system centred in commercial banks
Foreign investment in the financial sector and the financial crises in the 1980s and late 1990s (La Crisis de Fin de Siglo) led to closures and M&A that facilitated the consolidation of today’s banking system
Banking today: solid and efficient with less entities, regulated and supervised, gaining public trust

3. Banking today and its main trends
4 financial institutions dominate the sector
Grupo AVAL (ca. 29%)
Bancolombia (ca. 21%)
Davivienda (ca. 12%)
BBVA (ca. 11%)
() coverage in Colombia and abroad
LATAM (El Salvador, Panama, Costa Rica, Peru) and North America
() number of players – entering of foreign financial institutions
Banco Itau, Banco de Crédito del Peru, Citibank
Banking and financial sector contributed the most to the GDP’s growth in – 5% growth
Grupo AVAL: genera más de 50 000 empleos, entre 37 000 colombianos y 15 700 centroamericanos, esta presente en Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica y Panama
Bancolombia: esta presente en Peru, Puerto Rico, Miami, El Salvador, Panama
Davivienda: also in Costa Rica, El Salvador y Honduras
BBVA

4. Banking today and its main trends
() wealth – more HNWI / UHNWI leading to higher demand of PB services
Consolidation of the industry’s main players
() private consumption / lending
Household consumption will likely continue to provide the biggest support for real GDP growth
() opportunities for M&A

5. Source: DANE, Central Bank, Credit Suisse

6. Figure 4: Source: DANE, Central Bank, Credit Suisse

7. ? Strengthening the future of the banking system in Colombia?
Peace process ?
Tax
reform

8. Peace process, tax reform and banking in Colombia
Reallocation of resources (governmental and private expenditures)
Increase of private foreign investments
Increase of involvement of international financial institutions (e.g. WB, IDB, IMF)
More lending opportunities for rural development and post- conflict agreements
Robust labour dynamics
Structural tax reform (OECD recommended)
Contributes the funding of current fiscal deficit of 4%
Tax benefits for foreign investments
Financial sector directly involved in the implementation of tax reform
Less foreign debt in terms of GDP for this and next year

9. Final remarks
A successful implementation of both processes could foster the continuous development of the banking system in Colombia and its expansion within Latin America
At the same time, the banking system will be an important channel for the implementation of both processes
The banking industry in Colombia will work closely with the government in order to offer a more democratized process for lending to low-income households and “desmovilizados”.
With the implementation of the tax reform in 2017, it is expected that the government meets its target fiscal deficits of 3.3% of GDP this year and 2.7% of GDP in 2018.

10. Thank you for your attention
Andrés Felipe Marín Salazar
Vice-President
Head, Private Banking Colombia & CA, Credit Suisse