Overview
Colombia’s January 2023 External Circular 026 raised provisions for selected new consumer loans above 72 months, with a larger factor above 108 months. This series follows the expected-loss mechanism and matched 2022–2024 evidence: average rates, amounts, and LTV did not robustly change, but smaller lenders tightened the longest loans. It shows stronger preparedness without uniform credit restraint, while leaving defaults, welfare, and unobserved access unresolved.
Learning outcomes
- External Circular 026 raised provision coverage for selected new long-maturity consumer loans, especially above 108 months.
- The reform did not robustly change average interest rates, loan amounts, or LTV in the matched sample.
- In strict matched estimates above 108 months, smaller lenders reduced originated loan amounts about 20.9% and LTV about 8.8 points.
- The evidence supports stronger ex ante resilience, not conclusions about defaults, welfare, or unobserved credit access.
Keywords
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PlansFAQ
What did Colombia’s 2023 maturity-specific provisioning rule change?
It raised the expected-loss factor for selected new consumer loans above 72 months: K became 1.1 through 108 months and 1.4 beyond 108 months, instead of 1.
Did the reform make consumer credit more expensive?
The study found no statistically distinguishable average change in interest rates, loan amounts, or LTV for covered originated loans, though selective or unobserved changes remain possible.
Why did the average hide a tightening?
Smaller institutions reduced loan amounts and LTV above 108 months, while larger lenders had no significant total adjustment, so different responses could offset in aggregate.
What can the evidence show about Colombia’s reform?
It supports stronger provision coverage for selected new loans and a distributional effect at smaller lenders, but not claims about future defaults, borrower welfare, rejected applications, or the whole credit cycle.