Following the approval of the Bitcoin Law in El Salvador by the members of the Legislative Assembly, which creates a legal framework that recognizes this digital currency as legal tender in the country, the IMF warns that financial and legal risks have arisen.
The coronavirus has left an economic impact in several countries. For this reason, some governments are developing exceptional measures to mitigate its effects. For example, the suspension of tax and mortgage payments to lessen the economic pressure on small businesses and households.
In the United States, interest rates were reduced to almost zero and a US$700 billion stimulus program was launched in a bid to protect its economy, says Mario Miranda, director of finance at MonederoSMART.
Fitch Ratings agreed to change the perspective of the region's banks from stable to negative, arguing that the current health crisis will affect financial institutions in all countries.
Considering the measures that countries have adopted in the last 15 days in economic matters, following the spread of covid-19, Fitch expects that there will be a decrease in the issuance of loans.
The impact of the coronavirus crisis on the financial sector in Central America is expected to be felt mainly in services related to stock brokerage and investment advice, where a drop is expected.
The "Information System for the Impact Analysis of Covid-19 on Business", prepared by the Trade Intelligence Unit of CentralAmericaData, measures the degree of impact that the crisis will have on companies according to their sector or economic activity, during the coming months.
Up to July 2019, gross loans in the country totaled $12,840 million, 5% more than the amount reported in the same month of 2018.
With respect to the assets of the banking system, data from the Superintendence of the Financial System (SSF) detail that up to July of this year totaled $18.558 million, which represents a $1.016 million increase when compared to the balance of the same month in 2018.
Up to March of this year, Salvadoran financial institutions registered credits to the construction sector for $521 million, 40% more than what was reported at the end of the same month in 2018.
Data from the Salvadoran Banking Association (Abansa) specify that between March 2018 and the same month of 2019 the net loan portfolio registered a 5.6% growth, going from $11,717.1 million to $12,372.7 million.
From May 2019, foreign customers will have to declare to local system banks that their funds meet their country's tax requirements.
The Superintendence of Banks of Panama (SBP) approved Agreement 02-2019, which implements the recommendations of the Financial Action Task Force, which consists of expanding the required due diligence measures of banks with their customers.
On February 14th and 15th, representatives of banks, international financial institutions and risk rating agencies will meet in Panama City to discuss issues related to the sector.
The event called "International Banking Congress for Regulators & Bankers," will be organized by the Superintendence of Banks of Panama (SBP) and seeks to address issues such as Basel III, prevention of money laundering, de-risking, new risks facing the industry, financial innovation-Fintech, cybersecurity, among others.
Up to the ninth month of 2018, El Salvador's gross loan portfolio totaled $12.342 million, 5% more than the same month last year.
According to representatives of the Salvadoran Banking Association (Abansa), between September 2017 and the same month of 2018 the gross loan portfolio increased from $11.764 million to $12.342 million.
In the first quarter of 2018, credit granted by banking system entities grew by 5% compared to the same period in 2017, driven by consumer loans and business loans.
Figures from the Salvadoran Banking Association (Abansa), up to last March, indicate that "... most of the financing granted was oriented towards consumption, housing, commerce and manufacturing, which in some way stimulated productive activity."
In 2017, bank deposits totaled $11,715 million, 10% more than the figure registered at the end of 2016.
The "Financial Bulletin of the Banking System up to December 2017", prepared by the Salvadoran Banking Association, states that "... in the last five years, deposits have had average growth of 4.3%."
The Salvadoran banking system is maintaining stable performance, despite an operating environment deteriorated by a recent increase in the risk rating for sovereign debt.
From a report entitled "Panorama one of El Salvador's Largest Banks in the First Quarter 2017" by Fitch Ratings:
As of December 31, 2016 the balance of loans granted by banks and financial institutions grew by 5.5% compared to the same month in 2015, reaching $12,409,000.
Figures from the Financial System Regulator point out that in the same period deposits grew by 3%, reaching $11,243 million.Most noteworthy were private sector deposits, which increased by $380 million, while the public sector fell by $53 million.
Fitch foresees returns for Nicaraguan banks, however the result will not be as good for the banking industry in Panama, Guatemala or El Salvador.
From Fitch's report "2017 Outlook: Central American and Dominican Republic Banks"
The 2017 Central American bank rating outlook is stable for 2017, reflecting slight changes in growth and financial performance, according to a new Fitch Ratings report. The evolution of some factors, such as interest rates and private investment, or the emergence of events that could increase reputation risk could alter the banking outlook.Stable Rating Outlook: The ratings of most banks in the region have a stable outlook, reflecting the fact that their credit profile will not undergo significant changes in Fitch's base scenario.Movements in the ratings will be derived mainly from adjustments in ratings of parent banks or sovereign ratings, or of unanticipated events.
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