The directory Central Bank of Uruguay (BCU) put a stop to the project to modify the regulations for debt coverage insurance, on which the Superintendence of Financial Services (SSF) of the entity had launched a consultation a year ago.
The news did not become known and, if it were not for a careful reading of the Annual Report and Activity Plan 2024 published at the end of February by the SSF, could have gone unnoticed. The truth is that no resolution was issued in this regard since, strictly speaking, there is no official decision either.
“In the month of October 2023, the regulatory proposal was sent to the Superintendent, who adopted Resolution and elevated the performances to directory within the framework of its regulatory powers. The Board of Directors in Minutes 3,686 of its meeting dated December 20, 2023, paragraph IV, established that he decided to exercise his right of avocation,” explains the document published on the SSF page.
The scope of the resolution
What does this mean? That the directory of BCU, from the power of avocation mentioned, he keeps for himself the attribution to regulate which the Superintendency usually has in matters of financial services by legal mandate.
“He does it because he doesn’t want it to be approved,” considered the economist. José Licandro, in this regard, considering that the regulatory change on debt coverage insurance had already reached a level of resolution and there were only a few steps left for its approval.
“The mere threat of the use of this power has historically operated as pressure mechanism ex ante from the Board of Directors to the Superintendency, which limits its technical autonomy, as has been pointed out by independent evaluations of international organizations such as the FSAP”, argued the former mayor of Financial Regulation of the BCU.
Likewise, Licandro pointed out that the use of this tool, in addition to being “extremely rare,” “implies an irreconcilable disagreement between the board of directors (of a political nature) and the Superintendency (of an essentially technical nature).”
For the economist, there could have been pressure for the regulatory project that operates within the defense of financial consumers “the sleep of the righteous will remain sleeping.” “It supports this assumption that in the resolution of endorsement there is no argument to support it, especially when this project dates back to 2021, has a broad foundation, was modified for the worse and delayed without apparent justification,” he pointed out.
What was the project looking to modify?
The idea of modifying the insurance coverage regulations debit balance, Presented in 2019 to start a debate, it had several twists and turns due to pressure from the sectors that would be affected by the changes of this project. In 2021, it went from being rated from high importance to medium, allowing times to become increasingly longer. In April of last year, the deadline to receive comments on the project had been extended, which, according to what is understood in the Annual Report of the SSF, It was adopted as a resolution in October.
Among the modifications was the intention to make the payment collection mechanism transparent. death balance insurance that users usually pay when accessing a loan or using a credit card.
Actually in Uruguay Card issuing entities and those that grant loans require their clients to contract and pay for insurance that is added to the costs they pay monthly for the financial product they accessed. This insurance is not contracted directly by the user, but rather the financial institutions themselves have it incorporated into their services after direct agreements with the insurers; and is part of the implicit interest rate.
The regulatory change sought to limit abuses to the financial consumer in the mandatory contracting of these insurances; It reduced by a third what institutions could deduct from the calculation of the interest rates charged for a loan or a credit card balance; and prohibited these companies from receiving “rebates” from insurers.
Source: Ambito
