After closing 2016 with a 37% drop in profits, financial companies expect to achieve better results diversifying their services in an increasingly competitive market.
The total profits generated by financial companies in 2016 barely exceeded $2.4 million, a decrease of 37% compared to earnings in 2015.This year companies in the sector projected better results, some on them betting on the SME segment, some focusing on generating new business in the construction sector and others expanding their offering of services.
The government and the private sector are working on a plan to renew the business model for the financial center, developing specialized services for different market niches.
A working group consisting of representatives from government, regulators and the private sector are making an assessment of the financial services platform operating in the country in order to redefine their objectives using the example of best practices in similar jurisdictions which are more developed and adapted to international regulation.
Unions are opposed to the legal reform which aims to extend the scope of the supervision of the Superintendent of Financial System over savings and loans cooperatives.
In the view of Julio Cesar Portillo, secretary of the board of the National Commission for credit unions in El Salvador and CEO of Co-Andes de R.L. ,"... the reform presented to the Legislature, seeks to impose on savings and loans cooperatives a framework of regulation and supervision which is exclusively for private financial companies and for-profit institutions such as banks. "
In the second quarter of 2016 three entities accounted for 63% of the assets of the cooperative system, which accounts for 10% of the Costa Rican financial system.
From a report by Fitch Ratings:
Cooperatives in Costa Rica: Defaults and Pressured Profitability
Concentration of Business Model: The cooperatives rated by Fitch Ratings (Coopenae, Coopeservidores and Coopeande 1) are the three largest in Costa Rica and account for 63.3% of the assets of the cooperative system, a sector that still has a low participation in the national financial system(10.6%). These entities have a business model focused on consumer finance for its members, which makes them dependent on the behavior of a single segment.
Optimal Financial Services has acquired the financial operations of Finca El Salvador for $12 million.
With the purchase of Finca, the company Optima will be managing total assets of $40 million and a portfolio of 14,000 customers."...The operations of Finca will become part of Optima's portfolio of financial products and services, incorporating individual loans of up to $300, and express credit up to $1,000, within 24 hours for small business. "
Among the factors hindering the fight against money laundering, are the existence of bearer share corporations, a lack of collaboration among government agencies, and a weak judicial system susceptible to corruption and favoritism.
From the report by the US State Department:
Panama’s strategic geographic location; dollarized economy; status as a regional financial, trade, and logistics center; and lax regulatory system make it an attractive target for money launderers. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking due to the country’s location along major drug trafficking routes. Tax evasion, financial fraud, and corruption also are believed to be major sources of illicit funds.
The Superior Court has ordered the temporary cancellation due to lack of a ruling from the Bank of Guatemala, and the fact that Congress gave approval without having a majority, as stipulated by law.
The Constitutional Court (CC) has provisionally suspended the Credit Card Act, which came into force on March 8. Gloria Porras, president of the CC, told Prensalibre.com that one of the major failings was that Congress did not pass the Law with 105 votes, which is defined as a majority.
Fitch is warning that the risks faced by banks are increasing and loan impairment in some segments could trigger a substantial deterioration in the financial performance of banks.
From a report by Fitch Ratings Central America:
Negative Outlook for Banking Industry: Fitch Ratings believes that the risks faced by banks are increasing, although its effect on balance sheets is slow because the environment is still favorable. However, the margin for maneuver is reduced and, therefore, the deterioration of loans in some segments could trigger a substantial deterioration in the financial performance of banks. This would be reflected in lower returns, adjusted capitalization and increased delinquency levels.
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