Excessive Liquidity in Nicaragua´s Banks

The volume of total deposits accounted for 50% of GDP and becomes mostly government debt.

Thursday, October 7, 2010

El Nuevo Diario reports, "in that sense, the Central Bank managed not only to extract resources from the economy, but also strengthened the country's international reserves, while private financial institutions also bought government securities, instruments used to finance the nation´s deficit."

Government policies helped curb bank lending to the private sector and in return increased public sector financing.

More on this topic

Nicaragua: Savings in Banking System Grow

June 2011

Economic recovery and resources from the Venezuelan Cooperation explain the rise in deposits.

The deposits in Nicaraguan national banks, especially those denominated in foreign currency, have shown significant increases in recent months.

Economists say the increase is due in part to improved economic conditions prevailing in the country, which have increased Nicaraguans savings and their confidence in the banking system.

El Salvador: Bank Deposits Up 5.6%

August 2010

Deposits to May totalled $9.2 billion, $0.5 billion more than at the same point in 2009.

The executive director of the Salvadoran banking association (ABANSA), Marcela de Jiménez, believes that this upward trend reflects a rise in certain economic activities, such as exports, remittances and, of course, savings.

$200 Million for Contingencies in Nicaragua

April 2009

With the loan, the Central Bank will face "temporary liquidity contingencies” and give backing to public bank deposits in the domestic financial system.

The loan was granted by the Central American Bank for Economic Integration (BCIE) so that Nicaragua could face up to the consequences of the international financial crisis.

When bank liquidity decreases

August 2008

The initial alarm signal is when a bank has no liquidity and begins to offer its savers, especially newcomers, interest rates that are far above those offered by other banks.

They also turn to borrowing from other commercial banks and the Central Bank. During the Great Depression (1929-1933), banks in the United States and in Guatemala had liquidity problems.

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