What are the effects of the modification of the statutes of the Banque de la République | Economy
The Banco de la República recently announced the modification of its statutes to align them with the international accounting standards and thus allow their profits not to be affected by high volatility.
(Banrepública increased the interest rate to 12% at the last meeting of 2022).
These adjustments have been made thanks to accounting practices in line with global standards and it is expected that with them, the profit of Banco de la República in 2022 will be around 1.7 trillion dollars.
This change will allow changes in the value of international reserves, resulting from changes in portfolio prices with passive management, not to affect profit when they are not realized, and that they are only recognized as income and expenses when they are made.
The idea is that this modification reduces the volatility of Banco de la República’s profits and therefore of the Nation’s income and prevents the Bank from incurring losses in 2022 due to the high volatility of international markets.
(Are Banrep’s interest rate hikes coming to an end?).
Until now, the statutes of the Banco de la República only allowed the registration of financial instruments in two categories: amortized cost and fair value through profit or loss.
For this reason, all changes in international reserves generated by changes in the prices of its investment portfolio have been classified in the second category, affecting profit, whether or not changes in reserves have been made.
This restriction made the profits of the Banco de la República, and therefore the revenues of the Nation, derived from these profits, volatile. In addition, it has moved accounting practices away from current international standards.
(How the Banco de la República rate hike affects people).
In addition to making the Nation’s revenues, which are used to finance the Nation’s general budget, more predictable and less volatile, this prevents the Banco de la República from having losses in 2022 for purely accounting reasons, and which are not not aligned with the registration methodology used internationally.
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