Academic literature on the topic 'Commercial law; Financial servives industry'

AbstractThe Islamic Financial Industry is an industry that organises financial services in accordance with Islamic Law, in the same way as the traditional financial industry is organised in accordance with secular law. The unique challenges facing the industry in terms of compliance with Islamic law have been internationally recognised in relation to capital adequacy, risk management, corporate governance, transparency and disclosure. The same, however, has not been true in the area of dispute resolution. The purpose of this paper is to identify the unique challenges facing Islamic finance in compliance with Islamic law in the ambit of English courts, evaluate the features of international commercial arbitration as they relate to overcoming these challenges, and provide some suggestions for going forward. The paper is structured as follows. Section 1 will provide a discussion on governing law of contract and the limitations imposed by English courts on party autonomy. Section 2 discusses International commercial arbitration as an alternative dispute resolution forum. Section 3 presents some ideas for going forward, within the context of historical lessons. Finally the paper presents some conclusions in Section 4.

AbstractThe Islamic Financial Industry is an industry that organises financial services in accordance with Islamic Law, in the same way as the traditional financial industry is organised in accordance with secular law. The unique challenges facing the industry in terms of compliance with Islamic law have been internationally recognised in relation to capital adequacy, risk management, corporate governance, transparency and disclosure. The same, however, has not been true in the area of dispute resolution. The purpose of this paper is to identify the unique challenges facing Islamic finance in compliance with Islamic law in the ambit of English courts, evaluate the features of international commercial arbitration as they relate to overcoming these challenges, and provide some suggestions for going forward. The paper is structured as follows: Section 1 will be used to introduce Islamic finance and frame the issues facing the industry in relation to dispute resolution. Section 2 will focus on providing the background required, while Section 3 frames Islamic finance in relation to conventional finance. Section 4 will provide an insight into Islamic law.

The recent emergence and rapid growth of new financial services by financial technology (Fintech) companies have driven banking institutions towards operational innovation in order to gain sustainable competitive advantage. This study aims to conduct an in-depth investigation of the banking sector in response to the challenges brought by Fintech startups. Based on the service innovation theory, we propose a novel hybrid multiple criteria decision-making method (MCDM) to evaluate service innovation strategies for improving the sustainability of China’s banking industry during the Fintech revolution. A six-dimensional model comprising 20 sub-criteria is constructed and both the decision making trial and evaluation laboratory (DEMATEL) technique and DEMATEL-based analytic network process (DANP) are used to explore interrelationships among the indices and their related weights. Finally, the modified VIšekriterijumsko KOmpromisno Rangiranje (VIKOR) method is employed to evaluate performance gaps in the four major types of commercial banks in China—state-owned, joint-stock, city commercial banks, and other credit cooperatives—in the field of service innovation. The improvement priorities, ranked from highest to lowest, are new business partners, new service concepts, organizational innovation, technological innovation, new customer interactions, and new revenue models. These results will provide strategies for the sustainable development of China’s banking industry and the implementation of changes in response to the impact of the Fintech revolution.

AbstractThe purpose of this paper is to observe, predict and assess the existence of Islamic banking in Indonesia in the development of facing and maintaining public confidence in the issue of banking crime that are currently, have been and will come. Sharia Bank As an institution in the form of a business / service industry, so in the future, commercial/state banks such as state-owned enterprise banks that manage Sharia Banks will be merged as separate National Sharia Banks. Space and opportunities for criminal acts in Islamic banking have the same space and opportunities as other banks (conventional banking). However, what distinguishes if a criminal act is suspected, it must involve institutions formed from the provisions in sharia banking law (national sharia board, sharia supervisory board) accompanied by the Police and financial service authority institutions, but in investigative work. The police apparatus or financial services authority first asks for instructions from the national sharia board and sharia supervisory board.Keywords: Crime, Conventional Banking, Sharia Banking. AbstrakTujuan penulisan ini, untuk mengamati, memprediksi dan menilai keberadaan perbankan syariah di Indonesia dalam perkembangan menghadapi dan menjaga kepercayaan masyarakat dari persoalan tindak pidana perbankan atau kejahatan perbankan yang saat ini, pernah dan atau akan datang. Bank (Syariah) Sebagai suatu institusi/lembaga dalam bentuk usaha/industri jasa (BUMN), begitu pun ke depan (wacana 2020) Bank-bank umum/negeri (BNI, BRI & Mandiri) yang mengelola Bank Syariah akan dimerger sebagai Bank Syariah Nasional tersendiri. Ruang dan peluang terjadinya tindak pada perbankan syariah memiliki ruang dan peluang yang sama dengan perbankan lainnya (konvensional). Namun yang membedakan bila diduga terjadi tindak pidana di dalamnya, haruslah melibatkan lembaga-lembaga yang terbentuk dari ketentuan dalam hukum/perundang-undangan perbankan syariah (DSN, DPS) disertai institusi Kepolisian dan lembaga OJK, namun dalam kerja penyidikan aparat Polri atau OJK terlebih dahulu meminta petunjuk DSN dan DPS.Kata Kunci : Perbankan Konvensional, Perbankan Syariah, Tindak Pidana.

Abstract This paper seeks to provide a more nuanced view of the creative industry that goes beyond assertions of its contribution to economic growth, which, it is then further argued, requires stringent copyright protection to ensure development. It argues that a critical first step is to optimize an existing copyright framework by addressing its inherent entrepreneurial challenges to better enable authors to garner economic returns. These challenges are identified before the paper delineates the creative industries in South Africa and related policies. It then turns to the ongoing copyright policy formulation process before setting out current and proposed copyright legislative provisions. The paper contends that essential aspects regarding both the creative and commercial aspects must be tackled first. At the creative stage, authors’ inability to use a large range of source works because of the fear of copyright infringement claims can be addressed by elaborating exceptions and limitations. On the commercial front, entrepreneurial capacity building for authors and curbing unfair author, publisher and intermediary contracts is vital. The use of statutory devices such as the reversionary interest, to recover lost or diminished opportunities to obtain direct financial gain from copyright work, could also be considered. Enhancing the viability of collecting societies and ensuring that royalties are paid to authors would also be a critical intervention.

In this paper, the effects of the recent global financial crisis on efficiency and profitability of financial institutions were analyzed. In a comparative study, the impacts of the global financial crisis on the performance of Islamic and commercial banks were examined. The fundamental difference between Islamic and conventional banking is that Islamic banking is founded upon the ethical principles of Islamic tradition and law (Sharia). By utilizing a sample of eight Islamic banks and eleven commercial banks, the impact of the global financial crisis on efficiency and profitability of the banking sector was evaluated. This study covered the period from 2006 to 2013. The results of this research were obtained from the Altman Z-score model, ratio analysis, the data envelopment analysis (DEA) method, and the seemingly unrelated regression (SUR) model. The results show that during the study period, Islamic banks (IBs) managed to maintain their efficiency while most commercial banks (CBs) suffered a loss in their efficiency. Furthermore, this study found that the financial crisis did not have a significant impact on the profitability of Islamic banks.

The current discussion about a “risk culture” in financial services was triggered by the recent series of financial crises. The last decade saw a long list of hubris, misconduct and criminal activities by human beings on a single or even a collective basis in banks, in the industry or in the whole economy. As a counter-reaction, financial authorities called for a guidance by a “new” risk culture in financial institutions based on a set of abstract, formal, and normative governance processes. While traditional risk research in economics and in banking was focused on the statistical aspects of risk as the probability of loss multiplied by the amount of loss, culture is a paraphrase for the behavior in collectives and dynamics of organization found in human societies. Therefore, a “risk culture” should link the normative concepts of risk with the positive “real-world” decision-making in financial services. This paper will describe a novel view on “risk culture” from the perspective of human beings interacting in dynamical and intertemporal commercial relations. In this context “risk” is perceived by economic agents ex−ante as the consequence of the time lag between the present and the uncertain future development (compared to a probability distribution calculated by observers ex−post). For all those individual decisions—to be made under uncertainty—future “risk” includes the so-called “normal accidents”, i.e., failures that will happen at some uncertain point in time but are inevitable, and the only questions are when failure will happen and how to maintain function in the first line of defense. Finally, the shift from an abstract definition of “risk” as a probability distribution to a role model of “honorable merchants” as a benchmark for significant individual decision-making with individual responsibilities for the uncertain future outcome provides a new framework to discuss the responsibilities in the financial industry.

The article identifies basic models of Islamic finance industry and provides a critical assessment (compared to conventional finance) оf mechanism of their functioning. Despite having obvious positive aspects, such as limitation of speculative or risky securitization, focusing on financing the real sector of economy and encouraging the direct interrelationship between financial and productive sectors, in our view, the mechanism of Islamic economics in some ways is at variance with a number of fundamental principles of effective economic activity. Objective factors (demographic, political, economic) cause an increase of role and influence of the industry over regional financial markets and international finance and determine the relevance of further research in this area. Today, Islamic finance comprises such commercial areas as capital markets, asset management and insurance. They represent all segments of modern financial market – commercial banking, operations with equity and venture capital, trade financing, insurance and even financial hedging. Only a small share of Muslims’ financial relations is provided in accordance with Islamic law. Under conditions of introducing the convenient, liquid and standardized financial instruments and further improvement of regulation for financial markets, redistribution of resources in favor of Islamic financial markets, as well as rapid growth of their share in international finance are expected.

The article identifies basic models of Islamic finance industry and provides a critical assessment (compared to conventional finance) оf mechanism of their functioning. Despite having obvious positive aspects, such as limitation of speculative or risky securitization, focusing on financing the real sector of economy and encouraging the direct interrelationship between financial and productive sectors, in our view, the mechanism of Islamic economics in some ways is at variance with a number of fundamental principles of effective economic activity. Objective factors (demographic, political, economic) cause an increase of role and influence of the industry over regional financial markets and international finance and determine the relevance of further research in this area. Today, Islamic finance comprises such commercial areas as capital markets, asset management and insurance. They represent all segments of modern financial market – commercial banking, operations with equity and venture capital, trade financing, insurance and even financial hedging. Only a small share of Muslims’ financial relations is provided in accordance with Islamic law. Under conditions of introducing the convenient, liquid and standardized financial instruments and further improvement of regulation for financial markets, redistribution of resources in favor of Islamic financial markets, as well as rapid growth of their share in international finance are expected.

Abstract Islamic financial law (IFL), an emerging global legal order, is a highly fragmented law comprised of both state and non-state generated laws, standards, commercial practices, institutions, fatwās and legal ideas. A recent event involving ṣukūk issuance in which Dana Gas claimed that its ṣukūk were no longer Sharīʿah-compliant highlights the legal disjuncture between global IFL and the laws of municipal legal systems, which have chosen to facilitate and regulate Islamic finance. Systemic legal issues or ‘legal gaps’ undermine investor confidence and impede sustainable development of the Islamic finance industry. Legal gaps include but are not limited to undeveloped securities laws, enforceability issues and a lack of clarity with respect to the role and effect of the Sharīʿah in the municipal legal systems of many MENA (Middle East/North Africa) states. This paper analyses these gaps and in so doing illustrates the relationship of IFL to the law of the United Arab Emirates.

China, a nation inhabited by one fifth of the world's population and often referred to as "the sleeping giant", is undergoing significant transition. China, subject to domestic changes in its quest for a new balance between traditions, socialist notions and market economy, defines its new role in a changing world that drives towards the globalization of trade in goods and services faces.
This study examines the Chinese position regarding two aspects significant for both China's domestic process of transition and China's international role: telecommunications and banking services. The first chapter examines the general international framework of the GATS with respect to telecommunications and financial services. This includes, inter alia, a study of the legal framework, comprising in particular the WTO Financial Services Agreement and the Basic Telecommunications Agreement. Chapter Two provides an overview of the Chinese telecommunications and banking sectors. This Chapter focuses on the historical and cultural background influencing the process of domestic deregulation and internationalization of these sectors. Chapter Three features an assessment of the Sino-US WTO Agreement on the telecommunications and banking sectors. In the course of this study, a number of concerns and probable consequences can be identified for both sectors examined.
Will "the sleeping giant" move on towards complete market liberalization, or is that prospect merely a castle in the air? This study explores how the China's legal framework governing these two key sectors might unfold.

This chapter examines collateral transactions. Being the backbone of secured funding with financial market counterparties, collateral underpins a variety of financial transactions within the global marketplace, such as repurchase agreements (repos), securities lending, and derivatives transactions-often collectively referred to as 'collateralised finance transactions' or simply 'collateral transactions'. In order to legally underpin a collateral transaction, parties to the transaction generally enter into the applicable master agreement, which will be a standard template document created and maintained by the relevant industry association. These include the Global Master Repurchase Agreement for repos; the Global Master Securities Lending Agreement for securities lending transactions; and the International Swaps and Derivative Association Credit Support Annex under the ISDA Master Agreement for derivatives transactions. The master agreements are standardised contracts in effect setting out the rights and obligations of the parties to relevant transactions. These contracts provide market participants with substantial standardization, efficiency, predictability, legal certainty, and flexibility in respect of legal and commercial aspects of transactions. In essence, these contracts are so widely used and with so little derogations that they function as lex mercatoria or the international law that applies to certain transactions between certain market participants.

The Czech Republic (CR) has been ranked the 1st among the countries of the European Union (EU) countries in the growth rate of broadband access. The Internet penetration rate has increased by 48 percent between 2005 and 2011. This high growth rate is driven by the entry of new operators and the proliferation of Community Wireless Networks (CWNs). The CR holds the first place in EU in the number of newly entered operators. There are 1150 companies providing Internet access in 601 Czech towns and 5645 villages. In addition, a number of community wireless networks have emerged as an alternative of these commercial Internet Service Providers (ISPs). Their main purpose is to increase the affordability and penetration of broadband Internet in the country. This chapter discusses the contribution of CWNs to the proliferation and affordability of broadband access in the CR, focusing on the reasons for their success and popularity. Their key success factors include obtaining a non-profit status, engaging academics, and cooperating with government entities. They formed the CZFree.net forum for experts and volunteers to exchange information and best practices with respect to new technologies, design considerations, and technical and social issues. It also articulates on technology options and best practices for building low-cost CWNs. Furthermore, the chapter discusses the role of the Netural czFree eXchange association in aggregating their technical, financial, and personal resources of individual CWNs. Thanks to this association and the CZFree.net forum, CWNs in the CR have become influential competitors in the local telecommunication industry.

Trafficking of persons, primarily women and children, is one of the growing social dilemmas concerning global society today. Not only is human trafficking a highly sensitive and polarizing subject, but it is also considered a common norm in many countries. Many women recruited into commercial sex work are coerced into the profession exploiting their financial and economic condition but continue to work in the profession to survive through easy money. The chapter focuses on a theoretical framework for understanding the victimization of female sex workers. It also reflects various lacuna in the present criminal justice system and law enforcement mechanism in criminalizing victims within the sex work industry. The chapter narrates the voices of commercial sex workers in India over the prejudices and criminalization by various laws and regulations towards their consensual sex work. The chapter recommends sensitization training and awareness amongst various stakeholders of the criminal justice system.

Over its 1968–1988 life, PSCo relicensed the Fort St. Vrain (FSV) High-temperature Gas Reactor (HTGR) for light water reactor (LWR) technology requirements. Estimates of the financial losses associated with the plant range from $500 million to $2 billion in 1980 dollars. Colorado ratepayers, the shareholders of Gulf General Atomics and its corporate successors — General Atomics, GA Technologies or just GA and Public Service Company of Colorado (PSCo) bore these losses. Two critical plant issues required solution for the plant’s economic success — (1) the high-cost of 93% enriched uranium fuel and (2) low unit availability. While fuel costs were beyond utility control, low availability was controllable, yet remained unresolved. Commercially isolated for twenty years, PSCo shut the plant down in 1988. Economic success of future HTGRs depends upon avoiding similar complications. This paper examines the issues that made FSV uneconomic, including those fundamental to HTGR technology and others attributable to the utility operator and its culture. Knowing the history of FSV and HTGR design, designers should anticipate reasonable challenges. Preparations will help manage future HTGR risks, costs, and assure operating success. Regulators and industry can assure more effective, economic operations in the next round of HTGR designs.

Abstract The modern society’s continuous increasing mobility requirements have encouraged new transportation technological platforms. The so called Hyperloop concept, also described as the fifth mode of transport (rather than road, rail, water and air) for both passenger and/or freight) is supported on the idea of a pod like vehicle, running in a near vacuum environment (inside tubes) at near sonic speeds, higher than current air transport ones. This technological approach has played a prominent role in the modern transport scenario, with a potential to offer high service levels, associated with high speed, reliability and weather operational flexibility, as well as reduced environmental footprint and costs. This groundbreaking technological concept, albeit revolutionary, can not be seen as a novelty, with previous precursors being proposed in the last century. However, the concept has been reintroduced in 2012 with updated technologies, in an open sourced format, by the acknowledged entrepreneur Elon Musk, to instigate further improvement/development among interested companies worldwide, focused on its exploration on a commercial scale in the near future. The Hyperloop concept is envisioned to compete with both the High Speed Rail (HSR) and Maglev services, in the 160–640 km (100–400 mi) range, as well as air transport, for up to 1,000 km (625 mi) range, with alleged both environmental and cost advantages over their competitors. However, despite the technology’s high performance potential, given its multidisciplinary feature (sonic/high speed, near vacuum, linear motor propulsion, electric power storage, pod environment maintenance/cooling, air quality control, transport capacity, among others) and its inherent current low maturity from both the engineering, operational and cost perspectives, there are several major technological, regulatory, planning, financial and environmental challenges to be addressed, prior to reach the commercial service status. In this context, it is currently required a huge research effort to figure out technological barriers, followed by prototype tests, to set up the safety and operational requirements. Work is current under way, with a huge research effort (from both the academy and the industry) focused on basic technological concepts, as well as some prototype tests (currently unmanned) driven to test the specific main technological approaches in a real world condition. Given its revolutionary feature, Hyperloop technology is seemed as both ambitious and controversial by the general public and transport experts, with some optimistic bets in its medium term revolutionary role in the passenger transport market, focused on some niche segments currently serviced by the rail mode, as well as other skeptical bets in its restricted role to the freight market, given some inherent safety issues. This work is supposed to present a review (supported on the current available technical literature) of the groundbreaking Hyperloop technology concept and its potential to fill some specific rail niche markets, in both passenger and/or freight segments, with an assessment of the main technology’s hurdles/bottlenecks status and their perspectives, from a technological, environmental and cost focus, followed by a snapshot of some potential Hyperloop project candidates.

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%.

With its annual Payment Systems Report, Banco de la República offers a complete overview of the infrastructure of Colombia’s financial market. Each edition of the report has four objectives: 1) to publicize a consolidated account of how the figures for payment infrastructures have evolved with respect to both financial assets and goods and services; 2) to summarize the issues that are being debated internationally and are of interest to the industry that provides payment clearing and settlement services; 3) to offer the public an explanation of the ideas and concepts behind retail-value payment processes and the trends in retail payments within the circuit of individuals and companies; and 4) to familiarize the public, the industry, and all other financial authorities with the methodological progress that has been achieved through applied research to analyze the stability of payment systems. This edition introduces changes that have been made in the structure of the report, which are intended to make it easier and more enjoyable to read. The initial sections in this edition, which is the eleventh, contain an analysis of the statistics on the evolution and performance of financial market infrastructures. These are understood as multilateral systems wherein the participating entities clear, settle and register payments, securities, derivatives and other financial assets. The large-value payment system (CUD) saw less momentum in 2019 than it did the year before, mainly because of a decline in the amount of secondary market operations for government bonds, both in cash and sell/buy-backs, which was offset by an increase in operations with collective investment funds (CIFs) and Banco de la República’s operations to increase the money supply (repos). Consequently, the Central Securities Depository (DCV) registered less activity, due to fewer negotiations on the secondary market for public debt. This trend was also observed in the private debt market, as evidenced by the decline in the average amounts cleared and settled through the Central Securities Depository of Colombia (Deceval) and in the value of operations with financial derivatives cleared and settled through the Central Counterparty of Colombia (CRCC). Section three offers a comprehensive look at the market for retail-value payments; that is, transactions made by individuals and companies. During 2019, electronic transfers increased, and payments made with debit and credit cards continued to trend upward. In contrast, payments by check continued to decline, although the average daily value was almost four times the value of debit and credit card purchases. The same section contains the results of the fourth survey on how the use of retail-value payment instruments (for usual payments) is perceived. Conducted at the end of 2019, the main purpose of the survey was to identify the availability of these payment instruments, the public’s preferences for them, and their acceptance by merchants. It is worth noting that cash continues to be the instrument most used by the population for usual monthly payments (88.1% with respect to the number of payments and 87.4% in value). However, its use in terms of value has declined, having registered 89.6% in the 2017 survey. In turn, the level of acceptance by merchants of payment instruments other than cash is 14.1% for debit cards, 13.4% for credit cards, 8.2% for electronic transfers of funds and 1.8% for checks. The main reason for the use of cash is the absence of point-of-sale terminals at commercial establishments. Considering that the retail-payment market worldwide is influenced by constant innovation in payment services, by the modernization of clearing and settlement systems, and by the efforts of regulators to redefine the payment industry for the future, these trends are addressed in the fourth section of the report. There is an account of how innovations in technology-based financial payment services have developed, and it shows that while this topic is not new, it has evolved, particularly in terms of origin and vocation. One of the boxes that accompanies the fourth section deals with certain payment aspects of open banking and international experience in that regard, which has given the customers of a financial entity sovereignty over their data, allowing them, under transparent and secure conditions, to authorize a third party, other than their financial entity, to request information on their accounts with financial entities, thus enabling the third party to offer various financial services or initiate payments. Innovation also has sparked interest among international organizations, central banks, and research groups concerning the creation of digital currencies. Accordingly, the last box deals with the recent international debate on issuance of central bank digital currencies. In terms of the methodological progress that has been made, it is important to underscore the work that has been done on the role of central counterparties (CCPs) in mitigating liquidity and counterparty risk. The fifth section of the report offers an explanation of a document in which the work of CCPs in financial markets is analyzed and corroborated through an exercise that was built around the Central Counterparty of Colombia (CRCC) in the Colombian market for non-delivery peso-dollar forward exchange transactions, using the methodology of network topology. The results provide empirical support for the different theoretical models developed to study the effect of CCPs on financial markets. Finally, the results of research using artificial intelligence with information from the large-value payment system are presented. Based on the payments made among financial institutions in the large-value payment system, a methodology is used to compare different payment networks, as well as to determine which ones can be considered abnormal. The methodology shows signs that indicate when a network moves away from its historical trend, so it can be studied and monitored. A methodology similar to the one applied to classify images is used to make this comparison, the idea being to extract the main characteristics of the networks and use them as a parameter for comparison. Juan José Echavarría Governor