El pasado 26 de septiembre, fue publicado en International Financial Law Review (IFLR) un artículo titulado Costa Rica: Corporate governance overhaul escrito por Neftalí Garro, socio de BLP experto en Derecho Corporativo & Comercial.

El artículo se debía a que el año pasado, en Costa Rica, el CONASSIF puso en consulta un borrador de este nuevo "Reglamento de Gobierno Corporativo" para todas las entidades supervisadas en el sector bancario, seguros, valores y pensiones.

El texto completo del artículo es el siguiente:

Costa Rica: Corporate governance overhaul

In the aftermath of the 2009 worldwide financial crisis or "great recession", international financial regulation bodies such as the Basle Committee on Banking Supervision and the International Association of Insurance Supervisors (IAIS) scrambled for answers to the question "What caused this crisis?" Although the causes were many, uniformly regulators came to the conclusion that lack of sound corporate governance practices was one of the root causes of banks, insurers and other financial services providers getting themselves into deep trouble. Boards of directors that were asleep at the helm, "runaway" CEOs, figurehead audit and risk committees, and a lack of checks on moral hazard, it was said, were to blame for many of the problems.

This led them to re-evaluate existing corporate governance rules and policies as applied in the financial services industries, specifically in the context of risk-based supervision, Basel III and Solvency II-type systems. Costa Rica has not escaped this phenomenon and recently Costa Rica's financial services regulator, the National Financial System Supervisory Council (known as "CONASSIF" for its acronym in Spanish), adopted a new set of corporate governance regulations that would replace existing rules for banks, insurers, pensions managers and securities market participants.

Key Features

On January 19th, 2016 CONASSIF published a draft regulation on corporate governance. Under Costa Rican law, before adopting any new regulations CONASSIF must publish a draft and hear observations from supervised financial entities and the general public. Sources close to CONASSIF indicate that the main drivers behind the adoption of these new regulations are the banking and insurance superintendents, both of which have been pushing for a modernization of Costa Rica's financial services regulatory system to bring it closer to a risk-based approach.

By way of summary, the following are some of the key features of the proposed regulation:

  • The new regulation would repeal the existing corporate governance rules adopted in June 2009. The rules currently in force have much more of a "checklist" or prescriptive nature, in that they spell out a series of requirements that all companies, regardless of their specific size, industry, scale and risks, must meet. CONASSIF deems that this approach is now passé.
  • CONASSIF has looked to the Organization for Economic Cooperation and Development (OECD) guidance papers on corporate governance and seeks to establish regulations based on principles rather than rigid checklists. To quote the draft, "regulation should provide orientation with respect to the supervisor's expectations in connection with the management of regulated entities and empower the board of directors, as the primary responsible party in charge of the business or entity, in the definition of the manner in which the principles contained in the regulation are satisfied."
  • Despite this intended focus, many in the industry feel that the draft regulations now proposed still carry a significant prescriptive weight, instead of a more flexible principles-based approach. This has been one of the main criticisms of the draft.
  • The regulations will apply to all sectors, including State and privately-owned commercial banks, non-bank financial entities, savings and loans associations and coops, currency exchanges, securities traders, mutual fund managers, securitization companies, insurers, reinsurers, insurance brokers and agents, pension fund managers, and, somewhat unexpectedly, non-financial securities issuers.
  • One of the main features that distinguishes these proposed regulations from the existing rules is the introduction of proportionality and differentiation criteria, which will allow each supervised entity, depending on it size, ownership structure, business and type of entity, to define its own risk profile and assess the potential impact of its operation on third parties.
  • The draft sets forth definitions of the duties of care and loyalty. Although both duties exist in Costa Rica as derived from basic commercial law principles, this would be an attempt put them black and white.
  • The draft provides for a series of duties incumbent upon boards of directors, sets minimum guidance on the profile that candidates should meet to be eligible to hold a position on the board, board member selection, the role of the chairperson, etc.
  • The new rules would require companies to define and state their risk appetite through a formal risk appetite statement, including quantitative and qualitative parameters. This would then need to be managed through effective risk management mechanisms, including lines of defence and an entity risk manager. A new compliance unit or function will also be necessary. Internal and external audit rules are also reinforced.
  • The new rules will require the adoption of a conflicts of interest policy.
  • The new rules refer specifically to the role and duties of various committees, including audit, risk, appointments, and compensation.
  • Guidance is provided on the duties and qualifications that a general manager must meet, as well as compensation, transparency and accountability parameters.
  • Special guidance is provided for corporate governance of financial groups or conglomerates.

What to Expect

CONASSIF is now in the process of reviewing all of the observations and input received from the various sectors affected by the proposed regulations. It is likely that the core of the regulations will not vary, since this new corporate governance approach is a key component of CONASSIF's risk-based supervision plan for upcoming years. There may be some changes in the wording of the rules to ensure that the above-referenced "principles-based approach" is not trumped by an overly prescriptive, checklist-type requirement. The other components of the risk-based supervision system (solvency and market conduct) have been updated (such as in the case of insurers, which have new solvency rules since 2014) or are in the process of being developed (such as certain market conduct regulations that are in the works – more to come).

The public consultations period has now passed and it is likely that the final version of the new regulation will be adopted this year. Although the new regulation would come into effect six months to a year after adoption (it is not clear if CONASSIF will stick to its initial six-month proposal or if the one-year period that banks and insurers have requested will finally prevail), financial services companies are already moving to get a grip on what this new regulation will mean. For now, companies would do well by familiarizing themselves with the proposed requirements, assessing how much their current corporate governance systems and culture would need to adapt in order to comply, and setting up a plan to ensure that the required adaptations can be done with the least amount of cost. Increased levels of board member duties and responsibilities may even prompt a shake-up of current boards of directors. Where companies do not yet have a risk manager, hiring may become necessary.


The ultimate goal is for corporate governance rules to aid businesses in operating more effectively while taking account of the interest of all of the company's relevant stakeholders. While understandable that local regulators are seeking to modernize existing corporate governance rules, many in the Costa Rican financial services sector wonder if Costa Rica requires state-of-the art rules that will come with a significant cost and administrative burden. With few exceptions, Costa Rica's financial entities have operated soundly for many decades with the existing corporate governance model. To use a metaphor, do Costa Rican drivers really need a Ferrari? Can one actually drive a Ferrari on Costa Rican roads? Or would everyone be better served with a decent Fiat or Toyota (less costly, easier to drive, equally effective in getting from point A to point B)?

Desde su publicación: Lo abordado en el artículo se ha llevado a cabo y el pasado 8 de noviembre quedó aprobada la versión final del nuevo Reglamento de Gobierno Corporativo para banca, seguros, valores y pensiones. La vigencia será 6 meses después de la publicación en La Gaceta.

Publicación original: Costa Rica: Corporate governance overhaul

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