The Bank of Bogotá, founded in 1879, was the first Colombian credit establishment. The Bank of the Republic was established in 1923 as the semi-official central bank. This bank is the sole note-issuing authority. The notes must be covered by a reserve in gold or foreign exchange of 25% of their value. The Bank of the Republic also operates the mint for the government. It rediscounts and makes loans to official and semiofficial institutions. In 1963, the Monetary Board was set up to assume from the bank the responsibility for setting required reserve rates for managing general monetary policy; this board, which formulates monetary, credit, and exchange policy, is thus the most influential financial agency in Colombia. The government supervises the banking system by means of a special governmental body, called the Superintendency of Banks.
In 2000, the Colombian financial system included 29 commercial banks (four of them state-owned), the Columbian Export Promotion Bank (BANCOLDEX), 107 foreign bank offices, six savings and loans corporations (CAV's), 10 development banks, 32 commercial finance companies, 37 trust companies, 33 insurance companies, and a state-owned mortgage bank. The Bank of the Republic and the commercial banks supply mainly short-term loans, and investment corporations make long-term loans.
In 1982, in the wake of a scandal that led to the liquidation of a commercial bank and a finance company, the government moved to reform the banking sector by placing limits on the equity any individual (or his family) could hold in a financial institution and on the credit any lending institution could extend to any individual or entity. Several more crises in the ensuing years shook public confidence in the financial system, but tight government control over the sector has brought it back to a state of partial recovery.
Beginning in 1989, the government began to privatize the banks. Several bank liquidations took place in 1999, including Pacifico, Andino, and Selfin. Two government owned banks merged (Estado and Uconal), while the largest government bank, Caja Agraria, was liquidated and replaced by the new Banco Agrario. The goal of the Superintendency was to reduce the number of banking institutions to about 17. The Central Bank devalued the peso by 9% in 1998, and by 10% in 1999, in an effort to stimulate economic growth. Manufacturing exports had increased by 57% in 2000. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $8.0 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $22.6 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 10.4%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 16.4%.
The Bogotá Stock Exchange, organized in 1928, is the largest official stock exchange in the country. The Medellín Exchange was established in 1961, and the Occidente Stock Exchange in Cali was established in 1983 and began operations in 1993. Trading of stocks and fixed-income securities rose 41% in 1996 over the previous year. The three public exchanges reported a total volume of $36 billion in 1998; the Bogota exchange accounted for 57%, the Medellin 28%, and the Cali exchange 15%. In mid-2001, the Bolsa de Bogota had 36 brokers and 189 listed companies.