Between May and June of this year, the average lending rate of commercial banks has fallen from 11.52% to 10.28%, a drop that is explained by the high level of liquidity of the banks and the low placement of credits.
The pandemic that caused the outbreak of covid-19 has hit the financial system, since due to the current market conditions, the active rates have come down between the months of May and July.
The Central Bank informed that from September 2, the interest rate for one-day loans will be reduced from 6% to 5.5%.
On August 30 the monetary authority of the country informed that "... will induce an additional decrease of the interest rate of the monetary repurchase agreements operations, locating the rate for 1 day repurchase agreements, from 6.0% to 5.5%."
A healthy trade momentum contributed 40% to the rise in loans signed in 2015 in the National Financial System.
In December, the National Financial System (SFN) awarded 1971.4 million cordobas in new loans, representing one of the main uses of financial institutions.
For the first time in nine years, the Federal Reserve has raised the benchmark interest rate, by 0.25%, starting off a process of a gradual adjustment which will make credit more expensive.
After seven years of interest rates at historical lows, signs of recovery in the US economy have led the Federal Reserve to announce the first upward adjustment in the federal funds rate, the main reference rate for structuring interest rates in the United States and around the world.
Private banks are protesting because "the provisions contained in the banking law referring to the requirements and authorizations for the establishment and commencement of operations of commercial banks will not be applicable to Produzcamos."
In the process of starting operations, the entity is not required to comply with the rules of the General Banking Act and that of the Superintendency for Banks and Other Financial Institutions (SIBOIF). The tax exemption for five years applied to goods and services that the bank acquires, as well as income generated, is another of the privileges set forth in the ruling of the reform of the Law on Creating Banco Produzcamos to be voted on this May 27 in the Assembly.
The interest rate that the Government of El Salvado pays for money from the Pension Funds is not more than 1.3%, while international investors are paid more than 7%.
Ricardo Soriano, Chairman of the Committee for the Defense of Workers Pension Fund of El Salvador (Comtradefop) reported that since the year 2006, the State has forced the Pension Fund Administrators (AFP) to invest the money belonging to Salvadoran workers in Pension Certificates, initially 30% and the 45% in 2012, money which has suffered a loss greater than $938 million each year.
A study of the evolution of interest rates in El Salvador over 37 years concludes that dollarization confirms the theory of parity between domestic and international interest rates .
From the concluding remarks of the study entitled "El Salvador: Determinants of interest rates" by Alirio Alfonso Fernandez:
During the VIII Petrocaribe Summit it was reported that the rate of interest on oil bills will be changed, increasing from between 2% to 4%.
The Guatemalan Vice President Roxana Baldetti, explained that Venezuela has modified the interest payment according to oil and oil supplies for more than a dozen Latin American countries. Guatemala's concern is so great that it no longer considers the agreement attractive and could move away from it.
The Central Bank of Nicaragua has revealed its monetary and financial report for December 2012.
Financial System:
In the month of December the SFN ‘s process of normalization of liquidity continued, which was reflected in the ratio of availability to deposits of 28.1 percent, partly linked to the pace of credit growth which was around 30 percent. Meanwhile, deposits showed a growth of 5.5 percent. Interest rates showed a slight decrease and stood at 21.2 percent, weighted average lending rate, while the weighted average deposit rate closed at 2.6 percent.
In light of rumors over possible changes to mortgage conditions, Nicaraguan real estate developers are asking the country's banks not to go through with them because they would affect the sector’s growth.
Alberto Atha, president of the Chamber of Builders of Nicaragua (Cadur), said that a rumor is spreading that some banks will increase interest rates on mortgage loans by between one and two percentage points and the premium could be increased by 15 %. "We are convinced that such a move would affect and stagnate the growth process that the industry is experiencing." ... although the changes are not yet official, they are holding talks with banks asking for these measures not to be applied in the immediate future. "
The National Institute for the Promotion of Competition has stated that there is an agreement between banks to fix interest rates on credit cards.
The Supreme Court of Justice (CSJ) of Nicaragua annulled the resolutions issued by Procompetencia against the practice, considerer by the watchdog as abusive against consumers.
Nicaraguan employers are complaining about the high interest rates charged on loans by the Banco de Fomento a la Producción (Bank for Development of Production).
Although the volume of credit to productive activities is generally larger, interest charges remain high: between 10 and 12%.
In a scenario of rising interest rates, the strategy to follow by investors should be of more activity.
Aldesa´s analysts explained in their blog, Pulse Securities, that when interest rates are falling, the investment advice is to invest soon and long-term, in order to ensure presumed higher performances than those available in the future and during the period of low interest rates.
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