This study is published by Deloitte in cooperation with the Alliance for Board Diversity (ABD). It analyses diversity on the boards of directors of 98 companies listed on the Fortune 100 index, and 492 companies on the Fortune 500 in the United States, using answers to a questionnaire given to their directors.

The information gives an insight into the representation of ethnic minorities and women over more than a decade, which the authors deem to have continued to grow slowly but steadily, more especially among the Fortune 500 companies.

The document, prepared by Atrevia and the IESE Business School each year since 2013, gathers information on the number of women sitting on the boards of Ibex35-listed companies. It draws attention to a slight increase in the number of female directors, as there are now 91 women sitting on these boards, 11 more than the previous year, accounting for 19.83% of total board members in companies on the index.

The securities exchange commission (Comisión Nacional del Mercado de Valores or CNMV) recommends at least 30% of board members be women, in its Code of Good Governance for Listed Companies. However, just 10 of the 35 companies listed on the Ibex35 comply with this recommendation (28.5% of the total). Still, progress is significant in comparison with 10 years ago, when women occupied a mere 5% of total board seats.

It points out that no board has more than 5 female members (Santander, REE, Iberdrola and Caixabank), and that just one company, Técnicas Reunidas, has no women at all on its board of directors. Moreover, the majority of female directors (68.13%) are independent directors, while just 3 female directors hold their seat as executive directors.

Currently, protection of personal data in possession of private individuals is regulated under Federal Law from 2010, while the protection of data in possession of public bodies is subject to constitutional principles and the 2002 Law of Governmental Transparency, with no specific set of regulations. In this context, the General Law of Protection of Personal Data in Possession of Obligated Subjects has been passed in order to regulate the processing of personal data in the possession of the federal, state and municipal public sector.

The main aim of the law is to establish the foundations, principles and simple, expeditive procedures to guarantee that everyone may exercise their rights to access, rectify, cancel and challenge the personal data held by any authority, entity, body and organism of the Executive, Legislative and Judicial branches of government, autonomous bodies, political parties, trusts and public funds of the federation, federative entities and municipalities.

It establishes that the right to personal data protection will only be limited on grounds of national security, provisions for public order, health and safety or to protect third-party rights. Sensitive data (referring to more intimate matters) may not be processed without express consent from the individual in question, unless a law so provides or there is an emergency situation.

The law comprises 168 articles, divided into 11 titles, which:

• Distribute powers among the federal and state bodies, which are guarantors of the data protection.

• Establish the minimum thresholds and standardises the conditions regulating personal data processing.

• Regulate the organisation and operation of the National System of Transparency, Access to Information and Protection of Personal Data.

• Guarantee enforcement of the data protection principles.

• Protect personal data in the possession of any person or entity, and regulate suitable processing.

• Promote, foster and disseminate a culture of personal data protection.

• Regulate the means of challenging and procedures for local and federal bodies to lodge claims of unconstitutionality or constitutional disputes.

The following are key new points in the law:

• Delimitation of the attributes of the National Institute for Transparency, Access to Information and Personal Data Protection (Instituto Nacional de Transparencia, Acceso a la Información y Protección de Datos Personales or INAI), which will coordinate and assess actions relating to the transversal public policy of personal data protection, and establishing and implementing criteria in this area.

• Definition of the regulations for national and international transfer of personal data, facilitating the exchange of personal information among authorities at the three levels of government.  

• Implementation and maintenance of a security management system, in line with prevailing national and international standards.

• Establishment of specific rules for personal data processing by security and justice bodies, in the scope of telecommunications.

• Recognition of mechanisms to allow anyone to challenge the use of their data before INAI and state authorities.

Failure to comply with the obligations established in the Law will be fined. The grounds will be acting negligently, with willful misconduct or bad faith, during the resolution of applications for the modification of personal data, and unduly and partially or totally using, removing, disseminating, hiding, altering, mutilating, destroying or incapacitating data held or to which access or knowledge may have been acquired in the performance of a job, charge or commission.

In the first issue of Progreso published in November 2014, we analysed Law 19.210 on electronic money and how it might help promote financial inclusion amongst the least well-off in society, who were not catered for by the traditional banks.

Two years later, the Uruguay executive branch is introducing amendments to that Law, to encourage a greater degree of traceability to transactions, bring more formalisation into the economy and introduce greater security for the population and commercial transactions. The most significant changes are:

E-money issuers (article 2)

The Law adds that financial intermediaries and institutions registered as issuers by the Uruguay Central Bank may issue electronic money.

Social benefits and compensation (articles 13 and 19)

Regarding the payment of remuneration to university professionals and self-employed workers in locations with less than 2,000 inhabitants, it postpones the deadline for incorporating online payment of salaries until there are touchpoints from which they can withdraw the money (automatic teller machines, financial correspondents or analogous).

It also states that social and other benefits may only be paid using e-money instruments that can guarantee the funds are not being used for other purposes. Moreover, the beneficiaries of food benefits are entitled to request issuance of up to one additional e-money instruments, in the name of their parents, children or partners.

Impossibility of embargo (article 21)

This article refers again to localities with less than 2,000 inhabitants, where the deadline for incorporation of e-money can be extended until there are touchpoints from which to withdraw the money in cash. Moreover, for domestic workers, this deadline can be extended until 31st December 2017.

Specifications of payment instruments (articles 24 and 25)

These articles add that institutions must provide e-money services to pay remuneration, fees, social benefits, etc, without discrimination or charge, for all those entitled to be paid food benefits certified by a judge that request payment by accreditation in an account of a financial intermediation institution or in e-money instruments.

E-money accounts must meet the minimum requirements of enabling domestic transfers to the same or other financial intermediary or e-money issuer, through diverse media, such as automatic consultation terminals, mobile devices or websites.

It declares that these requirements will come into force on 1st May 2017, empowering the Executive Branch of the government to extend this period by up to a maximum of 6 months.

It also establishes that the minimum conditions will be applicable to local e-money entities, and that the conditions on withdrawal of funds and the making of transfers referred to in article 25 will not be applied to food benefits.

Other regulated payments (articles 35, 36, 37, 39, 40, 41, 43 and 46)

All payments regulated under articles 35, 36, 37, 39, 40, 41, 43, after 1st July 2017, will be subject to restrictions on the use of cash. The law makes it mandatory to make certain kinds of transactions only by online transfer as e-money (rents, sub-rents and loans for the use of properties; divestments and other real-estate business; purchase of motorised vehicles; national taxes; etc)-.

Likewise, it amends the fines for failure to comply with the foregoing articles, setting a ceiling for these fines at:

1. 25% of the amount paid or received by means other than those permitted, or
2. 10,000 Indexed Units* (34,900 Uruguayan pesos approx.. equivalent to USD 1,200 approx.)

Equivalence of card and cash payment (article 64)

Finally, the Law determines that merchants and suppliers deciding to accept debit cards or e-money instruments may not charge a higher price than they would charge for a cash transaction, or place a minimum limit for acceptance of e-money payments.

The article presents a retrospective and prospective analysis of rural and farm finance. It refers to the political, technical and technology challenges facing the sector and asks about the impediments hampering the development of agricultural finance.

The document defines fintech companies as non-financial businesses that use digital technology and associated tools to provide financial services. It emphasises their potential to boost the efficiency of the finance industry and promote inclusion of all social groups.

It says that their features and value propositions focus on ease of access from any touchpoint, any time, any place. Their low costs enable them to reach groups of population that traditional banks do not cater for.

Although it posits that the millennials are behind the success of fintechs and the extension of mobile-phone usage for different transactions, it points to barriers to their growth in developed countries, such as their highly banked populations. It therefore augurs greater success in emerging markets, where the potential for growth is greater due to weak banking systems and a major percentage of the population being unbanked. In Latin America, more specifically, the report recognises the difficulty in digital data transmission.

It considers the role of governments to be important, as they must find the right trade-off between regulating these  entities and avoiding the risks they could entail while supporting innovation.  

Finally, it analyses cooperation between fintechs and banks, concluding that partnerships are good for both parties, obliging traditional banks to reinvent themselves.

You may be interested in:

• The future of microfinance in the Fintech (Rupert Scofield)
• Digital finance for all: powering inclusive growth in emerging economies (McKinsey & Company)
• “When microfinance goes digital: opportunities, challenges and dangers for microfinance institutions and their clients” (Máster Internacional en Microfinanzas para el Emprendimiento de la Universidad Autónoma de Madrid)

The study drawn up by the Banking, Insurance and Pension-Fund Supervisor (SBS) and Swiss Cooperation (SECO), analyses the status of financial inclusion in the country. The survey was targeted at people aged between 18 and 70, living permanently within the national territory, using a sample of 6,565 people distributed over urban and rural areas in the 24 departments into which the country is divided and the Constitutional Province of Callao.

The survey aimed to help “identify the specifications of potential demand for integrated financial services and estimate the level of financial culture, barriers to access and use of financial services, and provide a more detailed diagnosis of financial inclusion in the country,” according to Socorro Heysen, the head of the SBS, when presenting the document.

It analyses several aspects, including the following:

• Degree of knowledge regarding touchpoints with the financial system in rural and urban areas.
• Principal payment systems used, and use of alternative means of payment.
• Level of savings in the population, whether banked or unbanked and, more specifically, the savings for old age
• Access to funding and loans from the financial system.

The Colombian Financial Supervisor (SFC) issued External Circular 028/2016, later amended by External Circular 053 of the same year, setting forth instructions for financial institutions regarding i) the information that must be reported to financial consumers and to the supervisor when events occur that interrupt servicing and truncate transactions and ii) the establishment of alternative financial touchpoints for consumers in such situations and mechanisms to ensure that their rights are enforced.

Its instructions on security mechanisms and touchpoints oblige financial institutions to adopt measures to guarantee a minimum level of service even when their usual channels are temporary offline.

They also state that the institutions must send SFC a quarterly report on the monthly availability of their channels (up-time). The report must include details on the methodology applied by each institution to calculate this up-time.

The SFC also establishes an obligation to report to it on events with a significant impact on confidentiality, availability or integrity of information in the systems used to operate the different channels.

The instructions state that when lines may be down for foreseeable reasons, eg, for scheduled maintenance, financial institutions must provide consumers with 8 working-days’ notice on which touchpoints and which services are going to be impacted, how transactionality may be limited, giving them information on alternative channels and downtime in services.

When it is not possible to inform consumers so far in advance, due to more urgent requirements to make changes or update systems, the financial institution must send out the information in the shortest time possible without it affecting such changes and/or updates in the hardware or software systems.

Additionally, when a line is going to be down for more than one hour, the financial institutions must inform financial customers of which touchpoints will be affected, which transactions they will be unable to carry out, which alternative touchpoints they can use, and the estimate time and date on which the service will be resumed, along with any other relevant information.

Finally, the SFC instructs financial institutions to establish mechanisms to compensate customers for the inconvenience caused by such down-time. These should take into account at least the following aspects: i) payment of the management fee and other services, ii) payment of transactions conducted on alternative channels; iii) payment of arrears interest and reporting to information centres, iv) measures to avoid customers being adversely affected by the impossibility of making their payments on time; v) channels through which to present requests, complaints and claims.

The Colombian Financial Supervisor (SFC) has included insurance companies operating in Colombia on the list of companies authorised to use local correspondents to provide services.

In its External Circular 049, the SFC adds new instructions to its Basic Legal Circular (Circular Básica Jurídica) regarding the conditions and manner in which correspondents may provide services to insurance companies.

Within these instruction, the SGC establishes that policies sold through correspondents must meet the conditions of universality, simplicity, standardisation and mass commercialisation. It also includes a list of the branches of insurance that may be sold by correspondents, including obligatory transit accident insurance (SOAT), funeral insurance, unemployment insurance, individual life and personal accident insurance and fire insurance.

It also allows the correspondents of insurance companies to bring forward the collection of premium payments and indemnity payments for any branch of insurance, the delivery of the supports or evidence, and the delivery and receipt of copies of policies and their appendices, general and particular conditions or extracts, certificates and other documents that may be necessary to lodge a claim, information documents and, in general, any information related to the insurance being sold through the correspondents.

The new instructions establish the rules for the insurance companies wishing to provide services through correspondents with respect to training, delivery of contractual documents, implementation of mechanisms for liaison with the correspondents and simplified procedures for lodging claims against their policies.  

Finally, the new instructions prohibit insurance brokers from acting as correspondents for the insurance companies.

The aim of this standard is to facilitate access to insurance for people leaving far from urban centres. Such initiatives are lauded by everyone working in microfinance.

You may be interested in:

• Banking correspondents and Financial Inclusion (Colombia)
• Banking Correspondant Linkages and Financial Inclusion Strategies in Latin America (Teresa Boada Serret and Aylén Rodríguez Ferrari. International Master’s degree in Entrepreneurial Finance at Madrid’s Autónoma University)

The Colombian Financial Supervisor (SFC) has issued the External Circular 050/2016, creating a new chapter for the Basic Legal Circular, which it set forth originally to establish special provisions applicable to specialist electronic payment and deposit companies (Sociedades Especializadas en Depósitos y Pagos Electrónicos or SEDPEs).

The new chapter includes standards regulating the legal regime for SEDPEs and their corporate governance, risk management, electronic deposits, money orders, consumer protection and service channels.

It reiterates that the corporate purpose of a SEDPE must be limited to: i) funding from electronic deposits; ii) making payments and transfers, iii) acquiring local and external loans to finance its operation and iv) sending and receiving money orders.

The SFC establishes that the corporate governance of SEDPEs should include the suitable structure to manage the risks associated to its operation, providing a clear definition of the roles and responsibilities and reporting lines.  

Pursuant to these instructions, SEDPEs must have at least the following governance bodies: i) general meeting of shareholders; ii) board of directors; iii) a legal representative; iv) tax auditing department; v) internal audit department and vi) an audit committee.

Regarding risk management, it makes it mandatory for SEDPEs to design and implement risk management systems to ensure suitable, timely management of the risks inherent to their operation. These systems must cover operating risk (including legal and reputational risk), anti-money laundering and financing of terrorism measures (AML and AFT), liquidity risk, funding risk and market risk.  

The instructions on money orders establish that SEDPEs must have mechanisms to that they can return money to the order-issuer when money orders are sent out to parties that have not claimed them.

The chapter also deals with consumer protection, indicating that SEDPEs must follow the regulations established in the Basic Legal Circular published by the SFC in this matter (Circular Básica Jurídica expedida por la SFC. Specifically, SEDPEs must inform their customers that electronic deposits are covered by the FOGAFÍN deposit insurance, and notify them of the interest rates being offered for electronic deposits, and any restrictions on withdrawing such deposits in cash.

Finally, the instructions state which services SEDPEs may offer through correspondents. These include: i) money deposit, payment and transfers, ii) sending and receiving money orders in Colombian currency within national territory and iii) balance information.  

This decree modifies several provisions in Regulation 3755/5th March 2013, regulating Law 8968/7th July 2011, on the Protection of the Individual in the Processing of their Personal Data.

The reform is designed to clarify certain issues where doubts have arisen, to make it easier to apply the law properly and to simplify the procedure for registering data. The decree seeks to specify the scope of application of Law 8968 in the following areas:

• Internal, personal or domestic data base: clarification of these terms. These three categories are exempt from the requirement to register with the Residents’ Data Protection Agency (“the Agency”).

• Consent for the processing of personal data: permission for the processing of personal data must be free, unequivocal, informed and specific; it must be expressly granted in writing or digitally. The requirement that this consent be granted in an independent document has been suppressed, which makes the procedure much more straightforward.

• Distribution, dissemination: this refers to any way in which personal data is shared with a third party or published, by any means, for a commercial purpose.

• Transfer of personal data: informed and unequivocal consent of the data holder will always be required; the procedure is defined as the action through which personal data are transferred from the person responsible for a database to any third party different from that officer, from their economic interest group (that must be defined), from the handler, from the service provider or technology intermediary, provided that the recipient does not use them for commercial, distribution or dissemination purposes.

• Financial institutions: the databases of financial institutions which are subject to monitoring and regulation from the Financial Institutions Authority [Superintendencia General de Entidades Financieras] do not have to register with the Agency. Nonetheless, the Agency still has full authority to regulate and uphold the protection of the rights and safeguards covered by Law 8968, and to exercise those faculties permitted under this law.

• Right to be forgotten: the limit of 10 years for conserving personal data is unchanged, but with the clarification that this limit is calculated from the date when the purpose of the data processing is finished. There are some exceptions to this provision: regulatory provisions or by agreement between the parties.

• Outsourcing the service provider or technology intermediary: in these cases the party contracting these services is responsible for the data, party who, furthermore, must verify that the intermediary or provider complies with a set of minimum security measures to ensure the safety and security of the personal data.

• Registering databases: clarifications are made as to the information which the database owner must supply when registering their database with the Agency.

• Calculating and charging the licence fee in the case of global contracts: the amounts payable have been reduced and the manner of payment has been changed.

 Furthermore, the “superuser” construct has been suppressed, given that this does not exist either in Law 8968 or in comparative law, but without prejudice to the Agency’s faculties of verification and inspection, stipulated in other legal and regulatory provisions.

This Resolution, published by Romania’s Financial Supervisory Authority sets out the corporate governance principles that came into force on 1st  January 2017 that are mandatory for companies that are authorised, regulated and supervised by this body.

The document is divided into 6 chapters which broadly cover the responsibilities of the Board of Directors and senior management, how to handle conflicts of interest and the risk management function.

It establishes that supervised institutions must have a system of corporate governance that meets the following minimum requirements:

• Transparent and appropriate organisational structure
• Allocation and appropriate separation of functions
• Effective risk management policy
• Mechanisms, policies and strategies for internal control
• Policies for communicating and disseminating information
• Procedures for preventing the publication of sensitive information

Furthermore, the members of the Board and senior management must have experience and be competent to fulfil their role, act with integrity and promote the good name and continuity of the company.

Board of directors

The structure and size of the Board must be commensurate with the nature and complexity of the institution in question. In any event, such advisory committees as are considered necessary to provide support on specific subjects may be set up.

The functions of this organ relating to the application of corporate governance principles must be set out in the company’s bylaws and developed in internal organisational and operational regulations. In any event, the Board will be responsible, at the very least, for:

  Defining the company’s strategy and approving its business plan;

• Ensuring compliance with applicable legislation in the area of information reporting to the financial supervisory body;
• Analysing the suitability and effectiveness of the company’s risk management system and its internal control systems;
• Defining the remuneration policy in such a way as to be consistent with the approved business plan, the institution’s aims and its long-term continuity;
• Designing a policy for communicating with stakeholders that ensures fair treatment of shareholders, timely dissemination of information and a transparent communication framework ;
• Monitoring the results of senior management’s actions, at least once every six  months;
• Analyse the company’s activities at least once a year;

Senior management

Senior management shall be responsible for the management, supervision and proper performance of the regulated entity, including the implementation of policies, strategies and achievement of the objectives defined by the Board of Directors.

Members of senior management shall work within a defined framework, with specific aims, and must have the necessary experience and skills to carry out their duties.

They will be in permanent contact with the Board of Directors, supplying them with timely and relevant, complete and accurate information about the company’s activity and its financial situation.

Managing conflicts of interest

The Board of Directors must ensure responsible conduct throughout the organisation, such that minimises the risk of creating conflicts of interest. To this end, it shall define and guarantee the implementation of procedures that enable potential conflicts of interest that might arise to be identified, and establish a way of managing these.

In any event, such conflicts of interest as may arise during the financial year must be reported to senior management and to the Board of Directors.

Risk management

The company must apply risk management procedures and strategies commensurate with the risk appetite and tolerance approved by the Board, which in any event should contain a definition of:

• The risk types identified and the manner of assessing and managing them;
• The risk tolerance limits for each type, in compliance with applicable legislation;
• The frequency of stress tests conducted and what they consist of.

Both the Board and senior management must ensure that the entity applies the procedures established. Moreover, the risk management system must be assessed at least once a year in order to analyse how it is working and introduce improvements as needed.

Annual report

In their annual reports, supervised entities must declare their compliance with the principles contained in the Resolution, using the model attached in the appendix, explaining the reasons for any failure to comply.

Brigit Helms

Brigit Helms is general manager of the Multilateral Investment Fund (MIF), an innovation lab for the Inter-American Development Bank (IDB) Group. She has 30 years of experience working to find creative private-sector solutions to development problems, including financial inclusion, in Africa, Asia, and Latin America.  

With a PhD in Agricultural and Development Economics from Stanford University and a master’s degree from the Johns Hopkins University School of Advanced International Studies, she has worked in the Latin America and Caribbean Division of the UN International Fund for Agricultural Development (IFAD), and in the Caribbean Division of the U.S. Department of Commerce. During her career, she has held senior positions of great responsibility in organizations and projects such as SPEED, a USAID-funded program in Mozambique; in the consultancy firm, McKinsey & Company; and in the International Finance Corporation (IFC). Brigit Helms is also a founding member of the Consultative Group to Assist the Poor (CGAP) and has broad-ranging experience in matters relating to microfinance and financial inclusion.

1. In several parts of the world, you have been in a position to observe up close the development of microfinance since its beginnings. What have been the main achievements of the microfinance industry in the last three decades? What contributions have Latin American microfinance institutions, in particular, made to these achievements?

Financial services are evolving constantly. Microfinance is just one stage of that evolution, which has showed that low-income people can be viable clients for the financial system. This is a proven innovation that has important roots in Latin America and the Caribbean. While this history is well known, I would like to highlight some aspects that I find especially useful:

• First, services do not exist in a vacuum; microfinance providers rapidly realized that there was a need to build institutions that worked for a different type of client (informal, no collateral), and were at the same time financially sound. If banks were not ready to do it, then nongovernmental organizations and others would create the now so-called microfinance institutions from scratch.  Microfinance was a real “disruption” to banking back in the 1990s.

• Second, this emerging industry understood that long-term viability was only possible if microfinance became part of the overall financial system and not a silo industry, and forward-thinkers worked to create an enabling regulatory environment. This was not easy, since regulators did not have experience in dealing with these new risks, clients and institutions,  and many were open to learning and experimenting.

• Third, an important factor was the openness of the microfinance industry to a very diverse array of stakeholders. It is not uncommon to see microfinance institutions funded by capital markets and private investors (local and international), alongside philanthropic funders.

These are a few of the important lessons that we can extract from the experience in Latin America and the Caribbean for the rest of the world.  Each country in the region is, of course, developing its financial systems at different speeds, but clearly those countries that have integrated this sector better into their local financial markets (Peru, Colombia, Bolivia) are further ahead.

2. Clearly, your institution has played an important role in the development of microfinance and, more generally, financial inclusion in Latin America and the Caribbean. What has been the MIF’s strategy in this area?

The MIF has been a leader among multilateral and bilateral development institutions in supporting the growth of the microfinance sector in Latin America and the Caribbean.  We have supported about 250 institutions working in financial inclusion—or close to one of every three institutions in the region—either directly with loans, equity, or technical cooperation grants, or indirectly through specialized investment funds.  Individual clients of these institutions have surpassed 5 million.  A crucial MIF role has been to provide seed capital to create and strengthen emerging microfinance institutions and to help them evolve into specialized banks or regulated financial entities.

Today, about 70 percent of all microcredit clients in Latin America and the Caribbean are served by regulated institutions that have developed new delivery channels—such as ATMs, banking agents, and mobile phones. This is a marked contrast with the 1990s or even the early 2000s, when low-income clients were typically served by nongovernmental organizations. More generally, the MIF has worked to create the foundations of a solid microfinance industry in Latin America and the Caribbean by strengthening individual financial institutions, helping them to become regulated, testing new lending methodologies and products, and leveraging funds. MIF technical cooperation grants have been used to support  microfinance institutions, regulators, banking associations, rating agencies, and startups. This was accompanied by specialized knowledge transfer, research, and financial-inclusion events, to disseminate lessons learned and best practices.

3. Could you share with our readers some highlights of the MIF’s past work in developing this sector?

Sure, here are a few examples that reflect our comprehensive approach to developing microfinance and financial inclusion:

• The creation of ProFund, the world’s first specialized microfinance investment fund, launched in 1996. This was followed by several microfinance investment funds that experimented with new ideas and funding structures, which have gradually been adopted by private investment funds, for example, funds focused on topics such as local currency lending and rural finance.

• Early support for product development that takes advantage of new technologies, such as the mobile wallet initiatives in Paraguay with TIGO, and in Colombia with BanColombia.

• Foromic, the annual MIF conference on financial inclusion in Latin America and the Caribbean. It has become the premier platform for networking on this topic, attracting  1,000–1,400 people year after year.

• The Microscope report and index. In 2007, the MIF championed the first tool to analyze the business environment for financial inclusion in Latin America and the Caribbean with the creation of the Global Microscope. The report has scaled up to analyze 55 countries globally, and it is one of the dominant publications on financial inclusion.

4. Let’s turn to the MIF.  Can you tell us a little more about your role in this organization? What is your strategy moving forward?

At the beginning of this year, I had the privilege of becoming the general manager of the Multilateral Investment Fund, and having worked in international development for many years, I was familiar with this organization’s accomplishments and reputation.  The MIF has a well-deserved reputation as an effective and innovative organization, and I was immediately impressed by the high quality and dedication of the staff. However, it was clear that there was a need to accelerate the pace of innovation to ensure MIF’s relevance going forward.

To do this, we’re building on the MIF’s 23-year track record with a new strategy that consolidates the Fund’s position as an innovation lab for the IDB Group. This means that we come in with projects and experiments that are too small, too risky, or too far upstream for the rest of the IDB Group (the IDB on the public-sector side or the IIC on the private-sector side). But from the outset, the vision is to outline a clear path to scale up these experiments via our “family” in the IDB Group or with other investors.

Another key element of the new strategy is focus. The MIF refocused its work on three areas to better match the needs of our region and more closely align ourselves with the IDB Group:  Knowledge Economy, Climate-Smart Agriculture, and Inclusive Cities. We also revamped our financial instruments to have an innovative product mix, which includes social impact bonds (SIBs); instruments that combine grants, loans, and equity; and royalty-based pricing for loans. In addition, we’re exploring social performance discounted loans.

For this to happen, we can’t rely on business as usual. As does any modern organization, the MIF needs disruption and innovation. This entails changing not only what we do, but how we do it. We need behavioral change on the part of human beings to internalize the need for change and do something different from what they’re doing now. This is the only way to actually push the boundaries, disrupt the status quo, and innovate.

5.Very interesting. Can you elaborate more on how you do this?  How do you promote behavioral change in an organization? Especially an organization embedded in a big bureaucracy like the IDB?

Change happens only when promoted from the inside out and this is precisely what we are doing at the MIF.  To illustrate this, allow me to tell a story about behavioral science and the lottery.

In an experiment conducted with tens of thousands of subjects, half the group is given a lottery ticket, while the other half is asked to write their own lottery ticket. The researchers offer the first group $5 to buy back their tickets, which they readily accept. But the second group? You have to offer them 3-5 times more to get them to sell.  

The moral of the story? When people “write their own lottery ticket” at their companies/places of work, they are 3-5 times more likely to commit to the result.  At the MIF, we’re shaking up the status quo by:

• Using a 24-hour hackathon to empower colleagues to re-imagine and streamline our project-approval cycle to take a quarter or third of the time it took before
• Holding “shark tank” pitch sessions for proposed new projects
• Creating interdisciplinary task forces to carry out tasks like revamping our website
• Flattening our leadership structure by allowing employees at all levels to head teams, and by conducting regular surveys that solicit direct feedback for top managers

By learning from our experiences and those of others, we hope to spark the innovation—both the what and the how—that is needed to help Latin America and the Caribbean face the challenges and seize the opportunities of the next decade.

6. How do microfinance—and more generally financial inclusion and digital finance—fit into this new strategy?  

I consider microfinance as a stepping stone for more efficient and inclusive financial systems. Digital finance is another powerful force that is mainstreaming new digital technologies into financial systems around the globe, with immense potential for more efficient operations, better products, and alternative/new channels. The MIF will support its further development in the region, not as a goal in itself, but as a key contributor to our priority areas.

In fact, we are convinced that digital finance is an important element to fuel innovative businesses to consolidate, grow, and expand. Latin America and the Caribbean is fertile ground for a major revolution in digital finance, and the MIF and IDB Group are joining with large corporations, financial institutions, and innovative startups to advance this nascent industry.

7. Can you elaborate a bit more on the reasons that digital finance seems nascent in Latin America and the Caribbean? Why isn’t digital finance mainstreamed yet?

Several reasons are given for this. However, based on my experience, there are three important factors that help explain why Latin America and the Caribbean appears to lag in digital finance:

• Brick-and-mortar payment services. Our region has an established “brick-and-mortar” payment system for both domestic and international transactions, and people prefer to use cash. So, any new payment technology—for instance—must have a cash-in and cash-out system. Any new technology must build upon the existing financial system, combining the efficiency of digital platforms with the current financial infrastructure.

• Out-of-touch innovation. Companies have often tried to replicate models from other parts of the world in our region and have failed. Entrepreneurs and financial institutions must invest time in understanding the needs, behavior, and preferences of their customers. The success of electronic wallets in Colombia and Paraguay show that this is possible.

• A cautious regulatory environment.  The new economy requires flexible government regulations that adapt and respond to emerging technologies and business models. This has been difficult, because countries in our region have a tradition of keeping financial regulations strong, to avoid systemic risks and to protect consumers. This is good, but adaptations are necessary to take full advantage of new technologies.

8. Could you recommend any books or movies to our readers?

I’m embarrassed to say that I haven’t had much time to read lately. But I will always recommend The Five Dysfunctions of a Team by Patrick Lencioni for anyone who is serious about change management in an organization. I continue to find this entertaining parable super illuminating, and have used it at every opportunity throughout my career.

My favorite movie of all time is Being There, a 1979 movie that stars Peter Sellers and Shirley MacLaine. The movie sheds light into the human tendency to see and hear what we want to see and hear, sometimes to devastating and dramatic effects. I think it’s as relevant today as it was four decades ago!

The Financial Reporting Council (FRC) has published its report on “Developments in Corporate Governance and Stewardship 2016” to commemorate the 25th anniversary of the Cadbury Report in the United Kingdom.

The FRC is the UK and the Republic of Ireland’s independent regulator of good corporate governance. Funded by the government (which also appoints its Board) and listed firms, it carries out a critical role in the supervision and development of corporate governance standards in the United Kingdom and the Republic of Ireland.

“Developments in Corporate Governance and Stewardship” analyses the development of governance principles through the standards that were set in response to the Cadbury Report, and their application in corporate life.

It covers the main changes to the UK Code, especially those made in 2014 to harmonise with European regulation on risk management and internal control, remuneration policy, shareholder relations, succession planning and reporting published by the Appointment Committee.

The document contains information about market initiatives, such as the programme run by the “Executive Remuneration Working Group” which began working in 2015 to analyse executive compensation schemes and reduce their complexity. The trends on diversity, continuing work started by Lord Davies, and which were noted in the November 2016 Hampton-Alexander report, were also included.

It contains an overall assessment of the UK Stewardship Code, analysing the most important conclusions and commenting on key regulatory and private initiatives.

Margarita Correa

The vast majority of microfinance customers around the world are women. This is due, in the first place, to the fact that they are hardest hit by poverty, the most vulnerable among the poor and, in the case of Colombia, they tend to be the ones who have survived the war. In generational terms it has also been the female heads of the household who have, on the whole, led one-parent families. This is a key factor in explaining the lack of development in the region, because it makes it less likely that women participate in the paid-labour market.

In second place, there are more female microfinance borrowers because in the past, more women were excluded from the traditional financial system than men, due to particular social, political, economic and cultural conditioning factors, such as access to property, low educational levels and self-exclusion. Women have been prone to take on unpaid work, such as looking after the family, and have also been more likely to fall victim to violence. In many cases these conditions have led to women working in the informal economy*, excluding them from equitable development and wealth generation.

We have witnessed how women forge their economic independence through building up their enterprises. Their involvement in business empowers them, encouraging them to exercise their rights and Independence, thereby laying the foundations for their own welfare and that of their families.

The informal economy has enabled many women to juggle their two key roles, caring for their families while also running their business. But although they have been able to take advantage of the flexibility of movement it gives them, working this way means they lack any regulatory protection.

The heavy burden of responsibility that women take on with unpaid domestic work restricts the type of job they can take, which further aggravates their economic disadvantage. Measures are therefore needed that allow women to reduce the time they spend on unpaid work so that they can dedicate more to productive activities, increase their assets and access to markets, get better opportunities in education, and participate more fully in politics, employment and leisure.

Vulnerable women have provided an example of development and commitment. In Bancamía they account for 56% of all our clients. On average, they remain with us for over 3 years, are leaders in savings products and are less likely than male customers to go into arrears, contributing more to the quality of the overall portfolio.

This success story shows that microcredit helps women and their families. Nevertheless, it cannot produce a sustainable reduction in poverty on its own, nor trigger changes in gender issues unless additional action is taken. Specific standards and regulations must focus on women’s specific conditions and needs.

Empowering women and closing the gender gap is crucial if we are to meet the sustainable development goals of the 2030 Agenda. This requires a multi-faceted approach that factors in the specific problems of women in different parts of the informal economy. Innovative measures need to be adopted to improve the lives of rural women, focusing particularly on formalising their property rights and expediting their access to land, essential public services and markets for their products.

The United Nations’ recent report on women pointed out that “Greater gender equality means a higher level of human development, higher per capita income, faster economic growth and a more competitive economy”.

The financial industry is currently facing new challenges, not just because of competition and innovation, but also because of changes in the world economy. Lending to traditional microfinance customers, low-income women, will thus have to be adapted to meet new needs.

Traditional banking models increasingly focus on attracting the best customers from the microfinance market. Yet at the same time, women seem to be stuck in the informal labour market, where they are far more vulnerable to the vicissitudes of economic growth, gluts and scarcity of agricultural produce, migration of the labour force to the cities, increasing numbers of single-parent families, prevalence of gender violence, etc.

In Colombia, for example, when we look at the informal labour market figures by gender, it is apparent that women’s participation in the informal sector is growing, and over the last decade the statistics have shown a higher growth rate in rural than in the urban areas**.

Another point worth noting is that in the informal sector, women’s revenues are seasonal, both in urban and in rural environments, although more so in the latter, where incomes peak at mid-year and at year-end. As a result, women’s cash flows in the country are irregular and only go up twice a year.

During downturns in economic growth in Latin American countries, more women than men move into the informal labour market. This scenario ushers in new possibilities for signing up our development-focus clients.

But the numerical evidence leads us to question the sustainability and development of women’s enterprises, of family companies, the appropriate use of resources and the competitive advantages. We, as leaders of microfinance institutions, must proactively manage the value proposition for our primary clients.

Our microfinance experience has helped us to understand how women act as a stabilising force in society. Natural entrepreneurs and multi-taskers, they manage to bring up their children while also creating more cohesive communities. We have been witnesses to a generational change, with greater inclusion and equality of women. We have seen women grow on the basis of their own merits. We have observed their deep commitment to their families and to the world. I extend an invitation. May this tribute to women, which we will read in these pages and in many others, make us act, in whatever circumstances we find ourselves, to live up to the responsibilities we have as agents of change in the economies of the region and of their future sustainability.

“Let’s look at gender as a spectrum instead of two sets of opposing ideals”, Emma Watson, United Nations Goodwill Ambassador.

​

Article 65 of the Peruvian Constitution establishes that the State is guarantor of the interests of consumers and users, defending their right to information on the goods and services available to them on the market. This principle underpins the National Policy for Protection and Defence of the Consumer (referred to in this article as the National Policy). Its aim is to contribute to greater and more efficient protection of consumers’ rights to equitable treatment, with special focus on more vulnerable consumers.  

The National Policy is mandatory for all entities in the Peruvian State, at all levels of government, within the scope of their powers.

The regulation lays down the following specific aims:

a)      To strengthen the education of market agents (consumers and suppliers) regarding consumer rights and their mandatory compliance, implementing activities to guide consumers in their exercise of these rights and disseminating them.

b)      To guarantee consumer safety within the framework of consumer relations.

c)       To implement mechanisms to prevent and resolve conflicts between suppliers and consumers.

d)      To strengthen the National Integrated System for Consumer Protection.

The National Policy has been structured on the basis of four lines of action, which respond to the specific aims:

Line 1: Education, guidance and awareness-raising

Line 2: Protection of consumers’ health and safety

Line 3: Mechanisms to prevent and resolve conflicts between suppliers and     consumers

Line 4: Strengthening the National Integrated System for Consumer Protection

Finally, it establishes that the National Institute for the Defence of Competition and the Protection of Intellectual Property (Indecopi), as the national authority for consumer protection, will be charged with coordinating the implementation of the National Policy.

This Decree, published on 5th January 2017, encourages acknowledged top-tier banking institutions to invest in the Peruvian Financial system, guaranteeing the public’s savings and complying with the State’s duty to defend the interests of consumers and users, while protecting free competition.

Law 26702, Law on the General Financial & Insurance System and The Organizational Structure for the Banking and Insurance Authority, limits the participation of companies in the financial and insurance system in the capital and majority shareholding structure of another company with the same activity.

This decree includes a new provision and indicates that the restriction on participation in the capital of a company by another, similar one, established under current law, does not apply in the following two cases:

• When a foreign banking firm is included in the List of Top Category Banks published by the central bank, BCR.
• When a company in the country’s own banking system satisfies the criteria used by the BCR for inclusion in the List of Top Category Banks.

In these cases, the majority shareholder of the companies referenced may only be, in turn, a shareholder in another company of the same type.

Should a company be removed from the List of Top Category Banks or no longer fulfil one of the criteria indicated by the central bank for inclusion in said list, this will not affect the investment made at the time under the protection of this final, additional provision to the law.

The recitals of the law argue that while new companies may be set up in the search for greater competition in the Peruvian financial system, participants should always retain appropriate solvency levels, for which reason it is essential that those wishing to participate should be recognised as solvent.

Congress has published legislative decree 1257, the purpose of which is to set up instalment payments of tax liabilities and other revenues administered by SUNAT (FRAES). This aims to reconcile those tax debts and other revenues administered by the National Customs and Tax Administration Supervisor (SUNAT) that are in administrative or court litigation or subject to enforced collection measures, as well as to condone tax debts of less than one (1) UIT [taxation unit].

Debts that have been bundled into the FRAES are tax debts, including income tax, general sales tax, selective consumption tax, special mining tax, customs duties, and others, as well as other revenue streams handled by SUNAT; plus the pertinent interest, updates and capitalised interest applicable by law. These have been updated to the date when the request for inclusion in the FRAES was accepted.

The subjects who want to be considered in the FRAES are:

1. i) Debtors with annual income classified as third category income of under 2,300 UITs.
2. ii) Debtors who in all or some periods have declared under the New RUS, with annual income of under 2,300 UIT (gross monthly income).

iii) Natural persons who have not had third category incomes or declared under the New RUS (includes natural persons without RUC with customs duty debt).

Subjects declaring to the FRAES will receive a discount coupon that can be applied to the interest, updates and capitalised interest, and also to the fines and the interest these incur:

Debt ranges, expressed in UITs/Discount coupons:

• From 0 to 100: 90%
• Between 100 and 2000: 70%
• Over 2000: 50%

There is provision for the condoning of tax debts unpaid at 9th December 2016, replaced by taxes administered by SUNAT, applicable to debtors qualifying for FRAES, whose tax debt as of 30th September 2016 is less than PEN 3,950.

On 1st January 2017 the code for listed companies was published as part of the collaborative agreement between the Philippine Securities Exchange Commission (SEC) and the International Finance Corporation (IFC).

It contains 16 principles of corporate governance, supported by recommendations and explanations with additional material on how to apply them and based on the principle of proportionality, so that each institution can apply them according to its size, activity, etc.

The principles are organised in five sections, as follows: i) the Board of Directors’ responsibilities; ii) disclosure of information and transparency; iii) internal control and risk management; iv) shareholder relations, and v) duties towards other stakeholders.

Board of Directors

The code recommends that the board of directors should be made up of members who are qualified and experienced, that there should be a non-executive majority and that at least a third of members should be independent; all should act in good faith and exercise their functions with proper diligence and care.

It lays down a number of limitations on the exercise of board member positions: non-executives may sit on the board of 5 listed companies at most, to ensure that they have enough time to fulfil their role. Independent members may serve the company for a maximum period of 9 years, after which time they may be re-elected as dependent board directors.

The code also backs the separation between the Chairman of the Board and the Chief Executive Officer of the company, as well as the existence of the lead director should these two positions be held by one person.

The Board will be responsible, among other duties, for supervising the development and approval of the firm’s corporate policy and strategy; for the remuneration policy of board members and senior management being in line with the company’s long-term goals; for the existence of training and induction policies for its members; for annually carrying out a self-assessment of its activity, of its committees and of its senior management; and of defining succession planning for board members and senior management. It may receive help from the General Secretary and the Compliance Officer, who may not be members of the board and who must receive annual corporate governance training.

Similarly, it may set up those committees it considers necessary to help it perform its duties, and specifically: an audit committee, a risk management committee, a corporate governance committee, a committee on related-party transactions and others, such as the appointments and remunerations committee.

• Audit: composed of at least three non-executive members, chaired by an independent board member and with a majority of independent members.
• Related-party transactions: composed of at least three non-executive members, two of whom should be independent, and chaired by an independent board member.
• Risk management: composed of at least three members, chaired by an independent board member and with a majority of independent members.
• Corporate governance: composed of at least three independent members and chaired by an independent board member.

Information and transparency

The company must set out policies and procedures for disclosing financial, non-financial and information about sustainability, in compliance with applicable legislation and regulation. Specifically, it must report on:

• The remuneration of board members and senior management
• Related-party transactions
• Corporate governance policies contained in its Corporate Governance Manual
• The procedure for selecting external auditors

For this purpose it will have to keep open a communications channel that allows it to publish company information that might be of interest to the market.

Internal control and risk management

In order to ensure integrity, transparency and good governance, companies must have an effective internal control and risk management system.

The officers in charge of these functions will be appointed by the board and granted enough authority, resources and support to fulfil their responsibilities. They will have to be in permanent contact with the audit and risk committees.

Shareholders and other stakeholders

The company must ensure that its shareholders are treated fairly and equally, and that their rights are respected; these rights should be laid out in the Corporate Governance Manual and the company website.

The company must make available to them at least 28 days beforehand, such information as is relevant so that they can make informed decisions at the Annual General Meeting.

It will also make available a channel for solving internal controversies that may arise and create an investors’ relations office, to ensure smooth and fluid communication with shareholders, whose officer will be present at all shareholder meetings.  

Finally, the Board must identify its stakeholder groups and promote cooperation between them. It will establish policies and programmes that guarantee the fair treatment and protection of the same and will define a transparent framework of communication between them and the company.

With regard to company employees, the code considers that their involvement in company targets and in corporate governance processes is essential. To this end, the board will set out policies, programmes and procedures to make sure they take part, as well as a route for whistle-blowers so that they can express their concerns.

Corporate Governance Manual

The code follows the comply or explain principle, so companies will have to state in their annual corporate governance report their degree of compliance with the code’s recommendations, indicating those areas  where there is non-compliance and explaining the reasons for the same.

Institutions must send a Corporate Governance Manual that has been adapted to conform to the code’s provisions and recommendations to the supervisory body by 31st May 2017.

The Bill is a response to the need to ensure individual privacy, so that third parties may not impinge on that right. It covers issues relating to storage, interoperability, intelligence and analytical applications and digital information processing.

The bill is structured as follows:

Purpose

• To ensure respect and protection of fundamental rights, civil liberties and other associated legal assets.
• To safeguard and guarantee Panamanian citizens’ basic right to personal data protection.
• To establish regulations covering the processing, automated or not, of personal data.
• To provide citizens with an overarching legal instrument for their protection and defence.  

Scope of regulation

• Natural and legal persons in the state and private sectors, non-profit and for profit organisations, involved in personal data processing and/or custody.

Exemptions

• Natural persons who handle domestic data only.  
• Data agencies with credit histories of consumers: banking, insurance and other customers.
• Competent authorities working to prevent, investigate, detect or bring to trial criminal actions, or those enforcing criminal penalties.
• Subjects whose data is being processed for the purpose of financial intelligence analysis or relative to national security, in compliance with international law, treaties or conventions regulating these areas.  
• Subjects whose information has previously been dissociated or anonymised, such that the conclusion cannot be traced to the personal data holder.
• Those regulated under special laws.  

Domestic and international storage

• Data bases on Panamanian territory: all databases containing data of critical national importance must be physically housed on Republic of Panama territory.
• Data bases outside Panama: data may be transferred abroad, provided that the company and/or residing country has comparable standards of protection to those in this bill.
• The preceding clause will not affect data transfer: if the data owner has given permission, in the case of transfers between banks, money transfers, or between stock exchanges, of information which must be transmitted by law or under international treaties ratified by the Republic of Panama   or when the transfer is necessary in order to enforce an existing contract, one about to be agreed by the data owner, or in the interest of said titleholder.

Sanctions

• These will be levied progressively depending on the severity (mild, serious and very serious) and on the repeated commission of the infraction.
• They will have the following categories: verbal warning, written warning, fines or closure of the database.

Presentation in the National Assembly

• After approval from the Cabinet, the Minister for the Presidency of Panama, Álvaro Alemán, presented the above bill to the National Assembly on 9th February 2017.

Entry into law

• The National Assembly is currently debating the bill. If passed at the Third Hearing, it will be termed the Personal Data Protection Law and come into force one year after publication in the Official Gazette.

The Bank of Spain has analysed the relationship between how the Spanish court system operates and access to credit and default on the part of financial institutions in a number of Spanish towns.

The document concludes that an effective legal system helps access to credit; in particular, it notes that this trend is most apparent in the judicial execution phase, whereas it does not have such an impact at the earlier, statement-giving phase of the litigation process, possibly because at that point non-compliance events are more strategic (debtors are solvent).

As to the relationship with default, the report concludes that during an economic crisis the efficiency of the judicial system has a greater impact on the testimonial phase of the process. This can be explained by the fact that non-compliances are not strategic, but rather due to lack of solvency, since lenders have lower cash flows and less collateral.

This legislative decree amends Law 26702, Law  on the General Financial & Insurance System and the Organizational Structure of the Banking and Insurance Supervisor, enhancing the regulatory framework with reference to bank secrecy and tax reserves, in order to avoid tax evasion and avoidance and facilitate compliance with international agreements and commitments, respecting the rights, principles and procedures laid down in Peru’s Political Constitution.

It has included the National Tax Administration & Customs Supervisor (SUNAT) within the list of institutions that can apply for the lifting of bank secrecy, provided the request is duly substantiated before an authorised judge. The judge must rule on the application within forty-eight hours of its presentation.

Information obtained by SUNAT may only be used for compliance with international treaties or rulings from the Comunidad Andina Commission or in the exercise of its functions. Failure to meet with the provisions described in the previous paragraph may be subject to disciplinary proceedings by the competent authorities as a serious administrative infraction.

Finally, it establishes that, without needing to request the lifting of bank secrecy, companies operating within the financial system must supply information to SUNAT on transactions with their customers’ funds, with respect to the balances and/or amounts accumulated, highest average or total amounts over a certain period and yields on the funds, including information identifying the customers. SUNAT will request such information directly from the banks, although in order to do so a supreme decree must be expedited from the Ministry of Finance, detailing the information that can be requested.

Law 30424 establishes the responsibility of legal persons only for the crime of active transnational bribery set forth in article 397-A of the Criminal Code. Its scope is now expanded with the publication of this decree.

As explained in the whereases, the decree aims to bring international requirements into national law, enhancing the prevailing regulatory framework. It establishes a new field of administrative responsibility, while also regulating the crime of active transnational bribery, the autonomous responsibility of legal persons involved in other crimes of corruption, such as generic active bribery and specific active bribery, and the crimes of money laundering and financing terrorism.

For the effects of this law, legal persons are entities under private law, such as associations, foundations, non-governmental organisation and non-ascribed committees, irregular societies, bodies administering autonomous wealth and Peruvian State companies or mixed-economy companies.

The administrative measures to be taken against legal persons infringing the regulation will be as follows:

1. A fine of no less than twice or more than six times the profit obtained or expected from commission of the crime.
2. Debarment, of any of the following kinds:
3.  Suspension of corporate activities for a period of no less than six months or more than two years.
4.  Prohibition from carrying out future activities of the same category or nature in which pursuit the crime was committed, favoured or concealed. The prohibition may be temporary or permanent. Temporary prohibition may not be for less than a year or more than five years.
5.  Definitive debarment from engaging in State contracts.
6. Cancellation of administrative or municipal permits, rights, licences, concessions, etc.
7. Temporary or permanent closure of the person’s premises or establishments. Temporary closure is for no less than one year or more than five years.
8. Dissolution.

This law will come into force on 1st January 2018.

The National Supervisory Board of the Financial System (Conassif) has issued a set of regulations laying down the international standards and principles that should be incorporated into the corporate governance strategies of the entities it supervises.

On the basis of such principles, each entity will design, implement and assess its corporate governance framework, taking into account its ownership structure and legal status, the scope and complexity of its operations, its corporate strategy, its risk profile and the potential impact its operations have on third parties, always respecting the regulations governing the national financial system.

The regulations will be applicable to the entities supervised by the supervisors of financial institutions, the securities markets, insurance and pensions: Superintendencia General de Entidades Financieras (SUGEF), Superintendencia General de Valores (SUGEVAL), Superintendencia General de Seguros (SUGESE), Superintendencia de Pensiones (SUPEN) as well as financial conglomerates and group-holding companies.

The regulations are divided into nine chapters:

Chapter I. General Provisions: these establish the aims, scope and proportional application of the principles established, according to certain specifications of the institutions affected, with a list of definitions.

Chapter II. Board of Directors: This chapter is divided into eight sections:

• Section I. General responsibilities: the Board of Directors is responsible for the strategy, the management of risks, and the financial robustness and solvency, the internal organisation and structure of corporate governance for the entity.
• Section II. Corporate culture and values: the entities must adopt a sound corporate culture, and approve a code of conduct that should be known and applied by all those working within the organisation.
• Section III. Risk appetite: the Board of Directors will be responsible for approving and upholding a risk management strategy and a risk appetite framework for the entity. This must be communicated to all stakeholders by a “Risk Appetite Statement”.
• Section IV. Supervision of Senior Management: the performance of the senior management will be overseen by the Board of Directors.
• Section V. Composition and profile of the Board of Directors: the number of members and the composition of the Board of Directors must be appropriate, with at least two independent directors. It will take into consideration that the members chosen should have experience, know-how and other attributes that make them proactive, with good judgement, ability to teamwork and sufficient time available to devote to the performance of their duties. It is fundamental that the recruitment and appointment of candidates be clear, formalised and rigorous, and that there is a succession plan.
• Section VI. Structure and practices of the Board of Directors: the Board should be structured with suitable leadership, size and with committees constituted according to its needs. Following the latest tendencies in corporate governance, the regulations establish annual assessment of the performance of the Board of Directors, its members and its committees.
• Section VII. The Role of the Chair: The Chair is responsible for the correct running of the Board of Directors.
• Section VIII. Conflicts of interest: the entity should adopt a policy to identify, avoid and manage conflicts of interest.

Chapter III. Technical Committees

The Board of Directors, in order to best perform its functions, must set up Technical Audit, Risks, Appointments and Remuneration Committees, to help them with the matters falling within their scope. Each committee constituted must have its own set of regulations governing its duties, composition and other specifications regarding how it will operate.

Pursuant to general principles of good governance, the regulations establish that the Audit and Risks Committees should be chaired by independent directors, and that the Appointments and Remuneration Committees should each include at least one independent director among their members.

Chapter IV. Senior Management

The senior management, under the oversight of the Board of Directors, is responsible for managing the activities of the entity in a manner suitable to the business strategy, risk appetite and policies approved by the Board of Directors. Consequently, the members of the senior management must have the experience, skills and repute required to perform their duties.

Chapter V. Risk Management, Compliance and Control

To ensure integrity, transparency and good governance, the entities must have an effective internal control and risk management system.

Those in charge of these functions will be appointed by the Board of Directors, to which they will report directly, and they will have sufficient status, independence, resources and authority within the organisation to perform their duties.

Chapter VI. Remuneration, Transparency and Accountability

Pursuant to best international practices, the regulations establish that each entity’s remuneration system must be in line with its strategy, activity, targets, values and risk appetite.  Consequently, it should be based on good performance, encouraging acceptable risk-taking behaviour and reinforcing the culture. The Board of Directors is responsible for establishing mechanisms to foster transparency in the remuneration and rewards systems of the entity, and any information on this policy that may be relevant to its stakeholder (ownership of shares, audited financial statements, information on the Board of Directors, etc).

Chapter VII. Corporate Governance of Financial Conglomerates and Groups

The regulations establish that the Board of Directors of the holding company is responsible for the  corporate governance of the group as a whole.

Chapter VIII. Owners of Shares Traded on the Stock Exchange

This chapter regulates the rights of shareholders, and especially the right to equitable treatment, including minority holders and foreigners.

Chapter IX. Final Provisions

Regarding the corporate governance of foreign branches, reporting lines and agreements with the Supervisor, repeal of the regulations from prior to 2009 and the entry into force of the new regulations six months after their publication in the official gazette, ie, on 7th December 2016.

The banking, insurance and pension-fund supervisor (SBS) has put out its Regulation on Corporate Governance and Integrated Risk Management, under Resolution SBS 272/2017, analysed at its bill stage in Progreso 5.

The actual regulation contains matters not in the original bill. It establishes there must be at least one independent director on the boards of companies under its supervision and that companies with six or more board members should have at least two independent directors.

It also creates a mandatory board committee to deal with remuneration. The remuneration committee must pursue a remuneration policy that is in line with the company’s business strategy and policies, avoiding potential conflicts of interest.

It also gives a more detailed description of the companies’ obligation to identify potential conflicts of interest arising within the corporate governance and management bodies. Companies under SBS supervision must implement policies and procedures to deal with these, monitoring and controlling such potential conflicts.

Finally, it includes the updating of some concepts associated to risk management, such as risk capacity, risk appetite and risk ceilings. These are defined in line with the Principles for an Effective Risk Appetite Frameworks from the Financial Stability Forum.

This regulation will come into force on 1st April 2018.

This legislative decree endeavours to provide a more efficient solution to the consumer controversies that have sprung up by the issuance of swift and timely rulings from the National Institute for the Defence of Competition and Intellectual Property, generally abbreviated to Indecopi.

The main changes are:

• In the event of the provider making good on their incorrect behaviour before being notified that they are being charged, the procedure will be closed. This rectification will no longer be taken as a mitigating factor when setting the sanction.
• Non-compliance with the conciliation agreement or arbitration ruling will be sanctioned with a fine of between one (1) and two hundred (200) UITs [taxation units]; this was not formerly regulated.
• In the event that the supplier does not contest the suit brought, the procedure will be provisionally concluded, and a warning issued. This does not apply in cases of discrimination, although it will be considered a mitigating factor.
• Parties required to comply with a corrective or cautionary measure who do not do so will be fined at least 3 UITs; in the case of micro-enterprises, the fine will be at least 1 UIT.
• Indecopi may declare an early conclusion to a proceeding in the following circumstances: (i) when the plaintiff withdraws before the last administrative ruling is notified; and (ii) when the parties reach an agreement putting an end to the dispute.

This legislative decree creates the figure of the National Transparency & Access to Public Information Authority, reinforces Personal Data Protection legislation and the regulation over managing interests. One of its main functions is to oversee compliance with standards on transparency and access to public information, and “to promote the culture of transparency and access to public information”.

This standard envisages the creation of a Tribunal that will be the highest administrative authority, responsible for safeguarding the right to access public information throughout the nation. This  independent Tribunal will be in charge of hearing appeals against refusals to disclose public information, including information about regional and local governments, areas where instilling a culture of accountability and access to public information represents a significant challenge.

Sanctions applicable for refusing to disclose public information range from a written warning to a maximum fine of 5 UIT [taxation units].

Finally, we should note that this Decree also modifies some of the articles in the Personal Data Protection Law 29733, in particular those affecting the definitions and certain criteria that the National Personal Data Protection Authority has been applying, such as the relationship between the database owner and the processing officer, and further instances in which the personal data title owner’s consent is not required for the processing of their data, among others. These modifications require companies to confirm whether their personal databanks and the processing to which they are subjected are strictly compliant with the new legal specifications.

An excellent analysis from the City law-firm, Cleary Gottlieb, on the Green Paper presented by the British Prime Minister, Theresa May’s government. The consultation document sets forth the proposed reform of aspects in corporate governance that may later be put into law.

The analysis of the prestigious law-firm provides a summary of the key points in the Green Paper’s approach and how it might alter corporate governance in the United Kingdom. It focuses on i) executive remuneration and incentives, ii) the engagement of employees and other stakeholders in corporate decision making, and iii) the general improvement in governance standards for large companies in the private sector.

Regarding pay, it requires greater transparency and detailed information on executive pay, which must be put to a binding vote by shareholders at the general meeting with greater frequency, requiring qualified majorities for approval, or establishing maximum pay thresholds.

It also seeks to establish measures involving shareholders more in decisions on remuneration policy. It proposes shareholders and employees be consulted on the policy, and requires directors sitting on the remuneration committee to have specific expertise in the matters within its scope.  

The Paper suggests that long-term incentive plans last for more than the three years established under the current code, proposing five-year plans and requiring beneficiaries of share schemes hold their shares until the reach two times their gross salary.

The Green Paper proposes measures to ensure that companies listen to the voice of their employees, suppliers, customers, pension beneficiaries and other parties with a stake in the companies’ performance. It announces plans to include consumers and shareholders in board-level decisions by creating stakeholder advisory committees, charging independent directors with the representation  of the most significant stakeholders and expanding the content of the reporting models.

Another aspect refers to information requirements, which will depend on the size of the companies rather than on their legal status as “public, private or listed”.

The consultation period ended on 17th February. In Progreso, we will be monitoring future developments stemming from this Green Paper.

Corporate citizenship, understood in this document as ethical behaviour in the business culture, strategy and operations, has become an essential element, monitored by investors, creditors and other stakeholders. They recognise that a responsible attitude towards the environment, the community and governance is vital for companies to be successful and sustain their growth in the long term.  

Business management must incorporate human rights, environmental protection and the adoption of anti-corruption measures. The board of directors should bear all these elements in mind when reaching decisions and avoid focussing too narrowly on short-term financial performance.

The boards, collectively, and the board members, individually, are responsible for integrating corporate citizenship into their own corporate governance practices, protecting the rights and interests of stakeholder groups, managing risks and creating long-term value.

McKinsey has been publishing its Women Matter report for ten years now. This research document describes activities to foster equitable participation of women in the labour market.

The 2016 report was drawn up with the results of a survey of 233 companies and 2200 employees. It shows that the majority of companies have adopted measures to encourage greater equality of opportunity when filling positions of responsibility.

Such measures include definition of targets and programmes to increase female representation, tutorials, establishing gender indicators for ongoing monitoring, and human-resource policies and processes to attract, develop and retain talent.   

Nonetheless, the report shows that there is still a long way to go in order to obtain significant changes, and that persistence, senior-management commitment and the implementation of programmes and policies targeting gender equality are the three key factors in success.

After much debate, the German Cabinet has agreed to submit to parliament a draft bill to drive wage equality between men and women by transparently disclosing management information.

The bill’s preamble states that in Germany women earn, on average, 21% less than men. The gap can be explained by structural and sociological factors, such as the types of job they do, their disproportionately low presence in senior management positions, leaves of absence from work to look after children, etc.

The draft estimates that independently of these factors the wage gap between men and women is 7% for the same job position.

The regulation contains a mechanism to ensure that women can be informed of the average wage of at least six men who occupy the same positions as they do in the company. The requirement to provide this information will apply to all companies with more than 200 employees. Furthermore, those with more than 500 employees will be obliged to analyse their wage structure regularly, to check whether the same job pays the same wage and to report on gender and wage equality in their Management Report.

Germany, like other countries in the European Union, is trying to bring about a reduction in the wage gap with this proposed legislation.

The Bill was published on 5th January 2017 as one of a set of legislative initiatives by the Portuguese Government to promote equality of opportunity and reduce the gender wage gap.

The proposed law pursues a quota system to balance the proportion of men and women in management and supervisory bodies given that, as argued in the preamble, the presence of women in the senior management and oversight of companies is acknowledged to help improve business management by fostering a diversity of approach and enriching the decision-making process.

State-owned corporate sector and listed companies

The provisions of the regulation are applicable to state-owned and listed companies. The proportion of women and men of administration and supervision bodies in all firms must be:

• At least 33.3% female by 1st January 2018, for state-owned companies,
• At least 20% female by 1st January 2018; and at least 33.3% by 1st January 2020, for listed companies.

Consequences of non-compliance

Non-compliance with these thresholds could lead to the imposition of fines, 40% of the value of which will go to the Citizenship and Gender Equality Commission, 40% to the Stock Exchange Commission and 20% to the State.

Plans for equality

The institutions to which the regulation applies must prepare –and post on their websites- plans to encourage equality of opportunity between men and women, promoting the elimination of all gender discrimination and supporting a reasonable work/life balance.

These plans must be submitted to the Citizenship and Gender Equality Commission (“the Commission”), the competent authority to supervise the application of this law, and the Commission for Equality in the Workplace, which may make recommendations regarding the same and publish these on its website.

Every year, the Commission will write a report on how companies are applying this law. Furthermore, its application will be subject to assessment 5 years after the regulation comes into force.