Colombia: Improving Crisis Preparedness by mending inadequacies in the legal framework

The main objective of the project was to identify in detail specific solutions to institutional weaknesses that could undermine the ability of the authorities to respond effectively to financial distress and systemic crises. As in many such crisis preparedness projects, the most serious and difficult weaknesses identified are inadequacies in the legal framework. Primarily, these related to insufficient powers of relevant authorities, and insufficient enabling regulations or sub-statutory legal framework to employ all available legal authority.

This project was an immediate follow up to a prior FIRST project on crisis simulation that identified the systemic weaknesses. Thus, the project was able to capitalize on the awareness raised in the prior project and the authorities’ commitment to address key legal limitations preventing an effective crisis resolution toolkit.

Moreover, the connection to the earlier crisis simulation enabled authorities to quantify the effects that legal weaknesses in the crisis management toolkit would be likely to have; it estimated potential fiscal exposure and financial sector spillover. This “quantification” helped to focus stakeholder engagement to pursue legal reforms.

The authorities appreciated the effective and efficient implementation of the project. While it is still early to assess the long-term impact of the overall project, it is apparent that quick identification of the solutions for the legal framework has triggered substantive discussion to move forward to revamp the overall resolution framework. In doing so, the authorities will be able to learn from the financial crisis experience, and assess the options provided by the consultants’ outputs. The authorities’ specifically singled out the consultant’s preparation and delivery of a power point presentation as a critical aspect that greatly enhanced absorption of the legal recommendations.