Crisis moves to regional banks
In an exclusive interview with the head of the Asia Pacific and Western Hemisphere department of monetary markets of the International M...
In an exclusive interview with the head of the Asia Pacific and Western Hemisphere department of monetary markets of the International Monetary Fund (IMF), Carlos Medeiros confirmed that Latin American bank portfolios “ have begun to worsen”.
“The banks’ profitability has decreased meanwhile expired portfolios are increasing”, said Medeiros.
Even though there “hasn’t been extraordinary” deterioration, mortgage credit and personal consumption are beginning to “deteriorate”, he warned.
Credit card debt will also have a negative affect on business.
On the other side of the scale liabilities are increasing mainly do to a decrease in deposits and remittances from abroad.
However, the origin of this economic deceleration in the region is different from that of the financial chaos in first world countries.
Latin America has just been through an important economic growth that has created massive credit, but because economic activity has been decreasing, the consumers capacity to pay has been reduced.
World-wide uncertainty has lead Latin American banks to adopt more careful policies.
Amongst them is prudent management of liquidity, strengthening of analysis that determine conditions for extending credit and proactive bonds in anticipation of an expired portfolio flood of credit.
The representative of IMF recognizes that the government has taken important measures to re-capitalize their banks but recommends they consider deepening actions.
“There is always room for improvement of regulations even in the best of systems , ” said the expert.
Latin America will not escape the downturn even though the crisis did not originate in the region.
Medeiros admits that there exists a rigorous regulatory banking standard, but said that financial supervision must be expanded over institutions that represent risky systems.
Since the financial crisis has crossed the border, international cooperation must focus on establishing a common standard in political financial policies, he said. The role that rating agencies played in the crisis was not overlooked and their regulation should be stricter”. Latin America’s economy dropped from 4.3 percent in ‘08 to 1.1 in 2009.