Credit Functions of the Banco de la República

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Law 31 establishes precise conditions: it categorically prohibits the Issuer (of legal currency) from offering credits and securities to private individuals and entities. Exception is made for temporary assistance credits to credit institutions with liquidity problems, in fulfilment of the Bank’s role as lender of last resort.

As regards the tendering of credit by the Banco de la República to the Government, although not prohibited by the new regime, very rigorous conditions exist for the concession of credit. In effect, this sort of credit should be limited to instances of dire necessity and should be conceded only with unanimous approval of the Board of Directors.

Nevertheless, it is important to point out that the Constitution left the possibility open for the Bank to continue acquiring Government bonds on the secondary market. In this way, it is not the Bank which directly finances the Government but rather individuals who have purchased these bonds.