The Monetary Board approved the changes to the Credit Risk Regulations, which were proposed by the Superintendence of Banks and seek to simplify the requirements for loans not exceeding $160,000.
In this scenario of economic crisis resulting from the outbreak of covid-19, the objective of the endorsed modifications is to favor SMEs and individuals to gain access to credit lines offered by commercial banks.
Issuers have objected in particular to the cap on interest that can be charged, citing an increased credit risk and a reduction in the number of cardholders.
An article on Lahora.gt reports that "... Roberto Fuentes, of the Association of Credit Card Issuers of Guatemala (AEMPG), said the Credit Card Act does not have the technical basis necessary to actually have a positive effect on users.
The banks Banco de Costa Rica, Banco Nacional and the Banco Industrial de Guatemala "will have to reduce the growth rate of their loans, since their core capital levels remain modest."
From Moody's press release:
Mexico, July 21, 2015 -- Central America's leading banks will need to slow the pace of their loan growth as their core capital levels remain modest, said Moody's Investors Service in a new report.
The demand for credit by people who can not meet the requirements of regulated financial institutions, is favoring pawnshops and moneylenders.
Financial institutions operating under the official regulatory framework have requirements, as established in law, that many Guatemalans can not comply with when applying for a bank loan. This situation has resulted in an increase in the number of entities operating outside of the law, offering quick financing without a lot of formalities or requirements.
Summa Financial Special: Presenting the classification and analysis of the regional financial system.
In the April edition, Revista Summa will present its bank, insurer and stock exchange rankings. On the whole, it shows a healthy sector with the capacity to face the challenges ahead. Regional banking groups have gained greater importance and the magazine identified ten that represented 33% of the assets for 2008.
Banks and transmitters of credit cards add more application requirements and reduce credit limits.
The main cause is the likelyincrease in defaults, derived from the international crisis and bad local economic situation. In 2008, credit card delinquency increased, reaching 0.46% of the total of accounts receivable.
According to the article published in sigloxxi.com, Flavio Montenegro, General Manager of G&T Continental, indicated that "These are measures that should be taken to maintain credit in the country…," upon explaining that the interest rates were adjusted in the third quarter of 2008.
From abundance to scarcity: Challenges faced by Central American banks in an
environment of tight liquidity.
After having been hit hard by the US mortgage crisis in 2008, large US and international banks have considerably weakened, in some cases escaping from bankruptcy only thanks to strong government intervention. Such an event has eroded the public’s confidence in the financial system worldwide.
From abundance to scarcity: Challenges banks face in an environment of little liquidity.
After losses caused by the real estate crisis in the United States in 2008, big American banks and those from other developed countries have been greatly weakened and, in some cases, have only escaped bankruptcy thanks to help from their governments. This situation has contributed to the erosion of confidence in the financial markets at the global level.
It is indispensable for the economy to continue using credit to finance production and commercial operations.
The analysis by Raul Moreira published in the La Estrella in Panama emphasizes that "the demand for internal credit by the private sector was at $31.6 billion in October and continued to grow at 20.38%, while deposits had an increase of 24.69%, which shows that the main source of financing for the expansion of credit comes from domestic savings by individuals. Prudence and caution is recommended for credit policies and it is important to maintain the rhythm of capturing funding."