Announcement of World Bank Approves One Hundred Fifty Million Dollars to Strengthen Colombia’s Financial System on April 24, 2003

World Bank Approves $150 Million To Strengthen Colombia's Financial System Contacts: Gabriela Aguilar (5255) 5480-4252 Gaguilar2@worldbank.org Alejandra Viveros (202) 473-4306 Aviveros@worldbank.org For more information on this project, please see: Colombia - Programmatic Financial Sector Adjustment Loan WASHINGTON, April 24, 2003 — The World Bank today approved a $150 million loan to strengthen Colombia’s financial system and increase its capacity to fund future investment in the economy. The Programmatic Financial Sector Adjustment Operation aims to strengthen the government's capacity to manage and mitigate weaknesses in the financial system and to modernize the regulatory framework of banks, housing finance institutions and insurance companies. “The health of the Colombian economy depends on a robust banking sector, complemented by a modern, flexible capital market,” said Isabel Guerrero, World Bank Director for Colombia and Mexico. “This operation is an important step for a sustainable increase in economic activity, one that will benefit all Colombians.” The loan will support the Disposal of the earlier intervened financial institutions’ remaining loan assets (or underlying collateral) by packaging and selling such assets, and arranging the closure, sale or merger of weaker institutions in the country’s financial sector. Strengthen and diversify the participation of the housing mortgage market as well as non-bank financial services and securities institutions in the financial system to provide more liquidity in the markets. Improve supervisory institutions and legislation to incorporate areas of corporate accountability, governance and risk management. Promote further credit access by permitting financial institutions to provide credit or leases to small financial entities so that they can better fund the micro housing sector. Strengthen the capacity to detect money laundering activity associated with the drug trade or terrorist activity. “A strong and healthy financial system is key to protect the most vulnerable segments of the population from external shocks,” said John Daniel Pollner, World Bank Task Manager for the program. “By extending micro credit permitting full coverage of deposit losses for the smallest depositors in the event of bank failures, the poor will be better protected and can rely on the soundness of their savings invested in the financial system.” The aims of this operation are prominent in the Bank’s current Country Assistance Strategy (CAS) for Colombia. That strategy, approved in January 2003, aims to help achieve rapid and sustainable growth, to give all Colombians a share in that growth and to build efficient and transparent governance. The CAS involves project and investment loans of up to US$3.3 billion through June 2006. This fixed-spread loan, which will be disbursed immediately, is subject to a bullet repayment in 11 years. For more information on the World Bank’s work in the Latin America and Caribbean region, please visit: http://www.worldbank.org/lac. For the the current Country Assistance Strategy, see Colombia: Country Assisstance Strategy 2003.