The Banco de la República and the Constitution of 1991^*

In the Constitution of 1991, the Constituent National Assembly introduced various reforms to the central banking system that then existed in Colombia.

The principal reforms were aimed at the replacement of the Monetary Board by the current Board of Directors as maximum authority on monetary, credit and foreign exchange matters. The Board of Directors acts independently of the Government and is composed of seven members, as follows:

The Minister of Finance, who acts as its presiding member, the Governor of the Bank and five permanent, full-time members who are appointed by the President of the Republic to respective terms of four years. At the end of the four year term, the succeeding President may alter the appointments of only two of the five permanent members, leaving the remainder to continue the exercise of their offices. Nevertheless, none of the members can remain in office more than three consecutive terms. This system guarantees continuity in Bank policy while safeguarding it from the influences of political change, thus ensuring planning more in view of the long-term and garnering greater credibility with the public.

Here also, several of its functions were eliminated, such as that of extending credit (development credits) to the private sector or to the Government, except under those previously foreseen, special circumstances. Under normal circumstances, the Bank can only extend credit to financial intermediaries undergoing temporary problems of liquidity or shortage of resources.

The most important innovation was the decision to concede constitutional rank to the goal of preserving the buying power of the currency as principal objective of the Bank. This means that one of the priorities of the Board of Directors is the control of inflation, although this priority must be pursued in coordination with general economic policy. The harmony between the policies of the Bank and those of the Government is the motivating cause behind the appointment of the Minister of Finance as President of the Board. The reason that motivated the concession of such great importance to the control of inflation is inflation’s high cost. Given the high social cost of inflation, it is an urgent and pressing task to reduce it so that, with its reduction, savings and investment in the country might increase.

In order to expound and determine with precision the aforementioned constitutional norms, the National Congress published on December 29, 1992 the Law of the Banco de la República (Law 31).

REFERENCES

The Bank
| Introduction | History, Mission and Functions |
| Organizational Diagram | Financial Statements |
| Notes and Coins | Fellowships |
| Foundations | General Information |