The Interbank Market in Colombia and the Supply of LiquidiTY by the Banco de la República

This article describes some of the essential elements of both the Colombian interbank money market and the liquidiTY management (of local currency) by the Banco de la República. In addition, the paper proposes a simple model that incorporates some of those essential elements so that it can serve as a benchmark for the formal analysis of the Colombian interbank market in the future. The article explains both the differences among the main operations in this market and the mechanisms used by the Banco de la República to manage liquidiTY in the financial system. It also describes the Banco de la República’s expansionary daily auction and the determination of the corresponding quota (maximum amount to be lent to the financial system).

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