Guatemala's monetary authority (Junta Monetaria - JM), passed new regulations by which retirement funds at non-banking financial entities can now be transferred to banks.
The JM ruled this in its latest resolution, named 14-2010.
They explained that investors must approve the transference, and once in a bank, "the funds will be protected by FOPA (a fund protecting savings)".
Banks in Guatemala will have to increase their capital from 10% to 14% when granting loans in U.S. dollars to people with incomes in quetzales.
Banking Superintendent Edgar Barquín explained that the measure, which affects a third of the entire loan portfolio in dollars -$982 million-, will force banks in the system to increase their capital in $48 million.
Guatemala's Banking Superintendent submitted new regulations for approval before the Central Bank's Monetary Board.
Edgar Barquín, head of the Superintendence, explained that the proposed regulation intends to comply with Basel accords and strengthen risk-based supervision.
Barquín added that "... they want banks to execute strategies which include credit profiling, policies for risk management and adequate liquidity controls".
Even though the reference interest rate ("tasa líder"), has dropped 1.75 percentage points so far this year, the rate for an average loan increased 0.67 points.
In January this year, the average interest rate for loans was 15.06%, raising to 15.73% by the end of June, according to data from the Banking Superintendence.
Journalist Jenniffer Marroquín writes in an Elperiodico.com.gt article: "On the other hand, the reference rate for monetary policy [known as 'tasa líder'], was 7.0% in January, but after several adjustements it dropped to 5.25%. The central bank will review this rate once again".
The Monetary Board extended the term of the money table for domestic banks up to May 31.
Prensalibre.com reports: "The measure allows banks to get funds via repurchase agreements that were authorized on 1 November 2008 and which would have expired on 31 January 2009.
The option of opening a window to provide liquidity in dollars came from the decision of the correspondent banks to cut or reduce lines of credit to local banks."
The banking sector requested that the term for the temporary measure of providing liquidity in US dollars via repo transactions be extended.
Sigloxxi.com reports that "Jose Angel Lopez Camposeco, president of the Banking Association of Guatemala (ABG) and the Rural Development Bank (Banrural), commented that the measure worked, "because it is an instrument which gave signals that in case of any need for or suspension of credit, we have resources available."
Since yesterday financial groups offering loans will be required to have reserves that equal 100% of the expired credits portfolio.
According to prensalibre.com, "In order to achieve this, generic reserves have been established to support current (specific) requests.
Banks should have reserves representing a percentage based on the last accrued months of portfolio, which range from 5% for a 30-day accrual and up to three month, and 100% for more than a year."
The monetary board decided yesterday to keep the main interest rate at 7.25%, despite the request from the business sector to lower it in order to revive the economy.
How many houses are not being built and how many business projects have been stopped due to the lack of credit or the increase in interest rates? And, how many potential jobs have been lost as a result?
Tomorrow the Superintendence of Banks (SIB) will request that the Monetary Board approve a modification of the Regulations for Credit Risk Management.
Even though bank portfolios in arrears are not at a critical level, the SIB will request that the Monetary Board make the changes to the rules in order for banks to increase their reserves for bad debts (loans).
The Workers Bank (Bantrab) bought 99.97% of shares in the Bank of the Republic for $21 million.
The purchase has to be reviewed by the Monetary Board which can deny or postpone the acquisition and merger.
With this purchase, the Bantrab will adds assets worth $125.24 million, deposits at $95 million and a credit portfolio of $86 million. As of September 30, the Bantrab had assets worth $451 million and $334 in deposits.
Guatemala's legislature has introduced a bill that would criminalize persons who start rumors about financial problems in the national banking system.
Monetary authorities have been invited to clear up questions that some deputies from the Legislation Commission have expressed about how the crime of financial panic will be defined.
Those invited include members of the Monetary Committee and the president of the Bank of Guatemala.