‘Low interest can come for other types of credits’

Jonathan Malagón, president of Asobancariasays that there are clear signs of cooling of the economy to the point that the union lowered its projection of the gross domestic product for this year to less than 1% and that in this context it is timely for banks to reduce interest rates on credit cards to face the slowdown.

(More than rates: what you need to know to apply for a credit card).

Does the reduction in credit card rates show that banks can lower margins?

No. There is another interpretation. Why was last year not a good time for this reduction and now it is? In 2022, with the implementation of Cefen, (Net Stable Funding Ratio) and the upward rate cycle, what it did was make deposits more expensive for entities. If it had been done at that time it would be irresponsible. Now that the indicator has normalized and that the rate hike cycle is going to begin to decrease and inflation is going to drop, the conditions of the economy have changed and with the slowdown that is looming in the second semester, the banks show responsibility by tightening their margins so that this slowdown is not so strong.

Banks are acting procyclically. When the country is doing well, the portfolios expand and when it goes badly they narrow and, furthermore, the banks were not part of the problem. We demonstrate within the framework of the pandemic that credit can be dispersed.

Are these rate reductions going to be applied to other credits?

It’s already happening. As what is happening is not a consensual framework and instead is competed, since there should not be agreements, the results differ by entity and not only in amounts, but in public and type of credit in various modalities, in different magnitudes.

But they all have common elements, which are not cosmetic and instead are fundamental, since the competition is to benefit the client. It would not be unusual for them to come for other types of credits.

(Banco Popular highlights the payroll as a product with low interest).

How in which?

In everyone, well, in everyone there are challenges. In consumption it is related to the slowdown and unemployment, in the mortgage that falls 50%, and these reductions will allow reality to change a bit. In all types of credit, the best news will be the determined commitment that a sector has had with the economy.

Is it inconsistent with the foregoing that the Banco de la República is still raising rates to contain inflation?

Doesn’t scuffle at all. The Issuer has made a call not to become over-indebted and to correct excess demand. The signs of cooling are notorious and many revised downward the GDP projections for this year and Asobancaria also did so to 0.9% and there is a consensus among analysts that the slowdown is deeper and non-tradable inflation begins to fall immediately and tends to go down.

(Why the banking crisis would be benefiting cryptocurrencies).

Do you agree that from March inflation will begin to drop?

Inflation begins to drop in line with the slowdown. When the economy is expanding, inflation is high and when the economy is contracting, inflation falls.

And then this year how will inflation close?

In a digit. We believe that the end of the year will be 8.8%.

What is happening with the housing market and subsidies?

The financial closure of families depends on subsidies. Colombia was one of the countries that sold the most homes in the region and with the withdrawals and with the inconveniences that have arisen in the matter of subsidies, the country is going to return up to 8 years, but if they disperse quickly, the course.

(Fed chair aims to restore price stability.)

What do you think of the pension reform?

Positive that there is a consensus on the design. There is a parametric discussion and I recognize the work of the Minister of Labor and the Minister of Finance, as the dialogue is opened. The pillar system is agreed and debated and explained and there the Government scores a victory in the design consensus. We will have a parametric debate with Congress.

Will the pension funds be affected?

We are studying the reform and we do not want to anticipate.

Would the labor reform advance the accounting of night hours. How would it affect banks?

We are a capital-intensive sector and more than affecting the banking business, we will see the impacts on the macro climate.

Do you see any contagion in Colombia with the crisis of some banks in the US?

Zero. It is a niche crisis, of a particular industry bank and there are no communicating vessels. In Colombia, banks have a solvency level above, since 9% is required of them and they are between 16 and 17%, in liquidity risk they are above 180% and the nonperforming portfolio is 4%, which are even healthier than before the pandemic.

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