Academic literature on the topic 'Clearinghouses (Banking) – United States'

The pre-1914 U.S. banking industry is not easily characterized as a market operating through a price system. The endogenous development of the clearinghouse as the industry's organizing institution can be explained by inherent characteristics of demand deposits. During banking panics the clearinghouse united banks into an organization resembling a single firm which produced deposit insurance.

Notes the growing number of mutual self-help groups (MASH) in the United States and outlines five ways in which clergy may be involved in them: (1) as a referral source, (2) as an initiator of such groups, (3) as a provider of meeting space for the groups, (4) as a supporter of religious organizations' self-help efforts, and (5) by initiating self-help groups for clergy themselves. Provides a current list of Self-Help Clearinghouses in the United States.

Mobile banking penetration has been relatively low even though smartphones are the most dominant forms of mobile computing in the United States. This quantitative correlational study is focused on how consumers ‘perceptions affect their intention to use mobile banking in the United States. Among U.S. consumers with smartphones, Internet access, and a bank account; 68% used Internet, 33% used telephone-based banking, and only 21% engaged in some type of mobile banking activities in 2011. The web-based survey used in this study was derived from the technology acceptance model extended by the innovation diffusion theory. Data were collected by e-mail from a random sample of 398 people in the United States. The structural equation modeling (SEM) technique was used to analyze data. The results indicated that, perceived compatibility, credibility, and costs were the significant predictors of mobile banking adoption in the United States.

In 2020, an antitrust lawsuit was filed against the Pork Integrators alleging a §1 Sherman Act violation. At the center of the Lawsuit, there is an alleged exchange of atomistic information about the Pork integrators’ operations using Agri Stats, Inc. as a clearinghouse. We use the Supreme Court benchmark in American Column & Lumber to discuss two questions that arise from the Lawsuit. The first is whether the association of Pork Integrators and Agri Stats, Inc., resulted in the restraint of interstate commerce, the main specific issue at stake in the pork Lawsuit. The second is whether information-exchange agreements using clearinghouses like Agri Stats, Inc., lessen competition and offend U.S. antitrust law, a more general issue beyond the pork Lawsuit. We find that there appears to be ample evidence in the Lawsuit to merit prosecution regarding both trade restraints and information-sharing agreements. We conclude by discussing the role of the Agencies in setting the standards in information-exchange agreements.

This dissertation examines the free banking laws of seven states and the impact of three provisions of the laws on the states' banking experience. In Chapter I, a review of two current theories of the free banking experience is presented. One theory contends that the laws themselves induced the banking experience of the states. The second theory asserts that economic activity induced the banking experience. This study includes a discussion of both theories in the analysis of the provision's effect on the banking experience. In Chapter II, a simple model of the operations of a free bank is presented. Also, the laws of the seven states that determine the establishment and the operations of a free bank are reviewed. The review reveals that the states enacted similar provisions, but restrictions included in the provisions differ considerably. In Chapter III, the experiences of the states are examined. The states represent a spectrum of banking experiences. The experiences of each state are characterized by four measures; the entry rate, the failure rate, the below par rate, and the average loss per dollar. Each of these measures reflects a different aspect of banking behavior and each is examined in order to determine the effect of the provision and the effect of economic activity on the behavior of the free banks. The analysis shows that both the provisions and the economic activity influence bank behavior. In Chapter IV, a theoretical analysis of the effect of the stockholders liability provision on entry and on the bank's portfolio is developed. The theory shows that an increase in the stockholders liability of a free bank reduces entry into the free banking market and increases the risky asset-capital ratio of the free bank. The testing of the theories is presented in Chapter V. The empirical evidence confirms the hypothesis that an increase in the liability of the stockholders increases the risky asset-capital ratio. The evidence does not confirm the hypothesis that an increase in the liability of the stockholder reduces entry.
Ph. D.

This thesis is concerned with the relationships between profit, profit persistence, risk and competition within the US commercial bank sector. In particular, the thesis asks three questions: how profit and profit persistence are affected by changes in regulation designed to enhance competition; how profit persistence varies over time according to changes in market and economic conditions; how different aspects of banks' risk is affected by competition and market structure. Understanding the nature of these relationships is important given the prominent role banks play in the allocation of resources, the provision of capital to the economy and the stability of the financial system. Moreover, these roles in turn, have an effect on bank performance and wider economic growth and stability. Such issues have especially come to prominence following the financial crisis and thus there is a need for empirical evidence on which to base policy. To examine these relationships the thesis implements panel estimation techniques and obtains data on all commercial banks, primarily over the period 1984-2009, thus including births and deaths. The key findings show, first, that profit persistence is relatively low compared to previous US banking studies and compared to manufacturing firms. Moreover, persistence varies with regulatory changes, although not always in the expected direction, notably the increase in persistence following the 1999 Gramm-Leach-Bliley Act. Second, additional time-variation in persistence is linked to bank specific, market structure and economic factors. Notably, persistence varies with bank size and market share, market concentration and output growth, but the precise nature of these relationships varies across the sample and by bank size. Third, that there is a difference in the nature of the relationship between competition and loan risk on the one hand and competition and total risk and leverage on the other. We also find that the relationship between risk and market structure varies according to bank size and that the economic cycle influences banks' risk. The implications and contribution of this thesis lie in establishing empirical evidence for understanding the nature of the relationships between competition, profits and risk. This is particularly prescient given the move towards new regulation following the financial crisis. Key results here show that no simple relationship exists between bank size or market concentration and competition and risk, therefore policy should account for such differences, whether according to bank size or type of risk.

The worldwide financial services industry has undergone in the past two decades an unprecedented wave of consolidation within and across its three main sub-sectors: banking, securities activities and insurance. Today's observers assert that in ten years, most of the financial sector will be controlled by a small group of huge diversified banks. By enacting the Gramm-Leach-Bliley Act in 1999, Congress repealed the depression-era "Glass-Steagall" Act of 1933 and thereby officially removed the longstanding legal barriers that insulated banks from securities firms and insurance companies. As promoters of financial convergence have long been claiming that the introduction of universal banks in the United States would produce numerous benefits for themselves, but also for the economy and for their customers, these predictions can be assessed today in the light of empirical analysis. Now that "financial supermarkets" are totally legal in the United States, it is essential to assess whether they are economically and morally viable.

This paper examines the relation between banks' dividends and their future financial health. Using banks' Nonperforming Loans Ratio, Loan Loss Provision Ratio, and Z-score as proxies for their financial health, I show that there is a strong positive relation between banks' dividends lagged by one quarter and their financial health in the current quarter. This main finding continues to hold following several additional tests, including the application of an instrumental variable approach, the use of change in dividends as the key independent variable, the exclusion of banks that are subject to stress test, the addition of macroeconomic variables, the exclusion of too-big-to-fail banks, and the exclusion of non-depository banks. I also find that the positive relation between banks' dividends and their future financial health is more pronounced for banks with a higher degree of opacity, a lower Tier 1 capital ratio, and during the 2007-2009 financial crisis. This paper contributes to three strands of the finance literature, including the Risk Reduction Hypothesis of dividend signaling in corporate finance, bank dividend policies, and the determinants of banks' financial stability. First, I show that there is a positive relation between banks' dividends lagged by one quarter and their financial health in the current quarter, also meaning that banks' dividends are negatively associated with their future risk conditions. This finding is consistent with the Risk Reduction Hypothesis regarding dividend signaling. Second, Floyd, Li, and Skinner (2015) propose a new idea that banks use dividends to signal financial health, and they rely on this idea to explain why banks have a higher and more stable propensity to pay dividends vis-à-vis industrials during the past several decades. My finding that banks' dividends are positively associated with their future financial health empirically supports this idea proposed by Floyd, Li, and Skinner (2015). Last, to my knowledge, no prior study has attempted to extensively detect a direct relation between banks' dividends and their financial stability. I fill this gap by investigating whether this relation exists. I show that banks' dividends have significantly positive explanatory power on their future financial stability, as proxied by three risk conditions.

This study begins with a generel review of the developments of international law and relations especially during this century and then continues to consider these developments within the specific contexts of permanent sovereignty over natural resrouces and bilateral investment treaties from which it is concluded that there have been many changes in the context in which foreign investment is made as well as the substantive rules governing it. However, despite the changes in attitude and the developments. there seems to be no specific and detailed set of rules universally accepted to be governing foreign investment especially in the area of compensation which is the core of the matter. Having considered this general background, the study turns to the contribution of one of the most unique experiences in the history of arbitration i. e. the Iran-United States Claims Tribunal. After studying the general factual and legal background of the creation of the Tribunal and the examination of the instruments upon which the Tribunal's jurisdiction and structure are based, the thesis examines the practice of the Tribunal with regard to both expropriation and compensation. Attempt has been made to examine these issues from almost every relevant aspect. The conclusion reached in the final analysis of this part is that despite the consistency of the Tribunal's practice with regard to some general issues, there has not been much coherence when it comes to more specific and concrete issues such as the method of valuation and some aspects of expropriation and compensation. The final conclusion of the study is that there is still a long way to go before establishing a universal, specific and detailed set of rules governing foreign investment although the bilateral approach can be, and in fact is, considered as a safe interim measure of protection as far as the capital exporting countries are concerned. It also questions the viability and wisdom of adopting the Iran-United States Claims Tribunal experience as a pattern for resolving future investment disputes in light of the extraordinary background of its creation and controversies as to the precedential value of some of its decisions.

The purpose of this study is to examine the wealth effect of the Risk-Based Capital (RBC) regulation on the U.S. commercial banking industry. The RBC plan was first proposed in January 1986, and its final form was announced on July 11, 1988. This plan resulted from dissatisfaction with the old capital regulation, which did not account for asset risk and off-balance sheet activities. The present study hypothesizes that the new regulation restricted bank optimal behavior and, therefore, adversely affected stock prices. The second and third hypotheses suggest that investors used company specific information, Net Tier 1 and Total risk-based capital ratios respectively, in valuing stocks of the affected bank holding companies. Hypotheses four and five suggest that abnormal returns are proportionally related to the levels of Net Tier 1 or Total RBC ratio. Both the traditional event study and the portfolio time-series regression, with RBC ratios (Net Tier 1 or Total) as the weight factors, are used in this study.

Thesis (Ph. D.)--West Virginia University, 1999.
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AbstractThis chapter examines the formalization of banking supervision in the United States (US), focusing on the federal level. During the “free banking era” from the late 1830s to 1864, several state governments created banking supervisory systems at the state level. Triggered by the fiscal needs of the Civil War, as well as the demand for a national currency, the US became the first country to introduce uniform nationwide banking supervision with the creation of the Office of the Comptroller of the Currency (OCC) and the national banking system. The main purpose of the OCC was to ensure that the national banks did not violate the regulations related to the new currency, the US dollar. From a historical perspective, the rapid social and economic development of the US from the 1850s provided the background for this institutional change. Although the US case demonstrates that financial crises have not always driven the formalization of banking supervision, the crises of 1907 and the Great Depression served to further strengthen the formalization of banking supervision by prompting the introduction of multi-agency banking supervision in the US.

Open banking – promoted in the European Union by the access to account rule contained in the Directive (EU) 2015/2366 on payment services in the internal market (PSD2) – is supposed to enhance consumer’s welfare and to foster competition. However, many observers are fearful about the negative effects of the entry into the market of the so-called BigTech giants. Unless incumbent banks are able to rise above the technological challenges, the risk is that, in the long run, BigTech firms could dominate the market, by virtue of their great ability to collect data on consumer preferences, and to process them with sophisticated tools, such as Artificial Intelligence and Machine Learning techniques; not to mention the possible benefits arising from the cross-subsidisation. This paper aims at analysing the controversial relationship between open banking and competition. In this framework, many aspects must be clarified, such as the definition of the relevant markets; the identification of the dominant entities; the relationship with the essential facility doctrine. The specific competition problems encountered in the financial sector need to be inscribed in the context of the more general debate around access to data in the digital sphere. The evolving scenario poses a serious challenge to regulators, calling them to strike the right balance between fostering innovation and preserving financial stability. The appraisal intends not only to cover EU law and policy, but also to make a comparison with other legal systems. In this respect, something noteworthy is taking place in the United States where, as of today, consumers’ access to financial data sharing has been largely dependent on private-sector efforts. Indeed, Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (passed in the aftermath of the financial crisis of 2008) provides that, subject to rules prescribed by the Bureau of Consumer Financial Protection (CFPB), a consumer financial services provider must make available to a consumer information, in its control or possession, concerning the consumer financial product or service that the consumer obtained from the provider. This provision, which dates back to 2010, has never been implemented. However, on 22 October 2020, the CFBP has announced its intention to regulate open banking, issuing an advanced notice of proposed rulemaking. In light of their investigation, the authors advocate the adaptation of the current strategies to the modified conditions and, in some instances, the creation of novel mechanisms, more suitable to face unprecedented threats.

This rapid review synthesises the literature from academic sources, knowledge institutions, non-governmental organisations (NGOs), and trusted independent media outlets on the challenges small island development states (SIDS) face when they lose correspondent banking relationships (CBRs). The rapid review concludes that, although the loss of CBRs is a global phenomenon, regions with SIDS, such as the Pacific and Caribbean, have seen the highest rates of withdrawals. During the last decade, local and regional banks in SIDS have lost and continue to lose bank accounts at large global banks to a critical level, sometimes having only one or none CBRs with banks in major economies, such as the Unites States, the United Kingdom, the European Union or Australia. This means that local banks have reduced access to financial services related to cross-border financial transactions, impacting on remittances and trade finance.

Objectives. Survival rates for pediatric cancer have dramatically increased since the 1970s, and the population of childhood cancer survivors (CCS) exceeds 500,000 in the United States. Cancer during childhood and related treatments lead to long-term health problems, many of which are poorly understood. These problems can be amplified by suboptimal survivorship care. This report provides an overview of the existing evidence and forthcoming research relevant to disparities and barriers for pediatric cancer survivorship care, outlines pending questions, and offers guidance for future research. Data sources. This Technical Brief reviews published peer-reviewed literature, grey literature, and Key Informant interviews to answer five Guiding Questions regarding disparities in the care of pediatric survivors, barriers to cancer survivorship care, proposed strategies, evaluated interventions, and future directions. Review methods. We searched research databases, research registries, and published reviews for ongoing and published studies in CCS to October 2020. We used the authors’ definition of CCS; where not specified, CCS included those diagnosed with any cancer prior to age 21. The grey literature search included relevant professional and nonprofit organizational websites and guideline clearinghouses. Key Informants provided content expertise regarding published and ongoing research, and recommended approaches to fill identified gaps. Results. In total, 110 studies met inclusion criteria. We identified 26 studies that assessed disparities in survivorship care for CCS. Key Informants discussed subgroups of CCS by race or ethnicity, sex, socioeconomic status, and insurance coverage that may experience disparities in survivorship care, and these were supported in the published literature. Key Informants indicated that major barriers to care are providers (e.g., insufficient knowledge), the health system (e.g., availability of services), and payers (e.g., network adequacy); we identified 47 studies that assessed a large range of barriers to survivorship care. Sixteen organizations have outlined strategies to address pediatric survivorship care. Our searches identified only 27 published studies that evaluated interventions to alleviate disparities and reduce barriers to care. These predominantly assessed approaches that targeted patients. We found only eight ongoing studies that evaluated strategies to address disparities and barriers. Conclusions. While research has addressed disparities and barriers to survivorship care for childhood cancer survivors, evidence-based interventions to address these disparities and barriers to care are sparse. Additional research is also needed to examine less frequently studied disparities and barriers and to evaluate ameliorative strategies in order to improve the survivorship care for CCS.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.

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