Foreign Exchange, Derivatives and Structured Finance

Dear all,

The Ministry of Finance issued Decree 4765 of 2011 (“Decree 4765”) which regulates article 74 of Law 1328 of 2009 (“Law 1328”). Article 74 provides the possibility for early termination, liquidation and close-out netting under OTC derivative transactions, in the event the Colombian counterparty is subject to an insolvency, restructuring or liquidation procedure, provided that (i) at least one of the parties is under the supervision of the Superintendence of Finance or an authorized foreign agent, and (ii) such OTC transactions are registered in accordance with the rules set forth by the Colombian Government. The Decree is applicable as of the date of its publication on December 14, 2011.

The most relevant aspects of Decree 4765 are the following:

1. It regulates the registration procedure of OTC derivative transactions entered into between local entities under the supervision of the Superintendence of Finance and authorized foreign agents and/or other Colombian residents, as well as other Colombian residents (different from those under the supervision of the Superintendence of Finance) and authorized foreign agents.
2. It establishes the registration process for guarantees granted and located in Colombia in order for the foreign counterparty to enforce such guarantees without judicial intervention, in accordance with Article 74 of Law 1328 of 2009.
3. It clarifies that the enforceability of guarantees granted outside Colombian will be subject to foreign law and jurisdiction.
4. Finally, it provides certain clarifications concerning the procedures to determine the credit risk exposure of the entities supervised by the Superintendence of Finance when entering into cross-border OTC derivatives transactions.

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