‘Although the decline in credit continues, the entities’ indicators are adequate’

As of April 2024, credit institutions continued to show prudential solvency and liquidity indicators higher than the regulatory minimums, supported by existing regulation and supervision, together with prudent behavior of financial entities.

The capitalizations carried out by some entities, added to the issuance of subordinated debt with the capacity to absorb losses, have contributed to improving the capital capacity of this type of entities.

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This was highlighted by the Committee for Coordination and Monitoring of the Financial System in its 90th session that met this Friday, June 21.

The Committee said that The decreasing dynamics of credit continues to be consistent with the process of macroeconomic adjustment at the local level, where the portfolio of commercial and consumer modalities continue to show negative real growth rates. For its part, the real growth of microcredits and housing credit showed a positive trend in the first four months of 2024.

Likewise, he assured that a greater materialization of credit risk has been evident so far in 2024, mainly in the modalities of microcredit and consumption. The indicator of total overdue loans as a proportion of the portfolio balance stood at 5.9% at the end of April 2024. However, the level of coverage of the overdue portfolio through provisions continues to be greater than 100%.

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The Committee concluded that The financial burden of households has remained relatively stable, while their savings levels continue to show a path of recovery in a context of lower debt. Firms have shown lower demand for credit in an environment of lower investment.

He also assured that at the beginning of 2024, the profitability of credit establishments continues with a decreasing trend, after having exhibited high levels in previous years. This drop in profitability is largely explained by the higher expense in provisions and, to a much lesser extent, by the drop in the net interest margin, in line with what was observed in the previous year.

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“The results of the stress tests show that all of these entities would maintain total and basic solvency indicators above the regulatory limits, even in hypothetical adverse scenarios of the economy. The authorities highlighted the importance of financial intermediaries maintaining this solidity. The need to encourage a progressive transition of the structural funding of credit institutions that takes into account the expected modifications in the weights of the net stable funding coefficient (CFEN) that will become effective in September 2025 was also highlighted,” he mentions. the Committee in its report.

HOLMAN RODRÍGUEZ MARTÍNEZ
Portfolio Journalist