Fitch Ratings highlights the liquidity of the insurance market in El Salvador for the first semester.
At the end of the first half of 2010, liquidity in the Salvadoran insurance market was far superior to that of other Central American countries, and even recorded an improvement over the end of the first half of 2009. Liquid assets in the market cover 1.9 times the total reserves (1.8 times jun.09), a rate much higher than the average in Central America (1.5 times).
According to Fitch Ratings, even though the economic scenario has improved, Central American banks face challenges related to the quality of their assets.
Central American banking systems have weathered the financial crisis relatively well. Even though profits fell considerably during 2009, industry solvency levels remain good. Profits fall mostly because banks opted for liquid assets and increased their expenses in provisions.
According to Fitch Ratings, even though the economic scenario has improved, Central American banks face challenges related to the quality of their assets.
Central American banking systems have weathered the financial crisis relatively well. Even though profits fell considerably during 2009, industry solvency levels remain good. Profits fall mostly because banks opted for liquid assets and increased their expenses in provisions.
Fitch Ratings highlighted a 26.5% growth in net results by the Salvadoran Insurance Sector as compared to 2007.
•Greater Earnings. The Salvadoran insurance industry recorded a 26.5% growth in its net results for 2007, resulting primarily from an increase in subscribed premiums coupled with a lower accident rate.
• Overestimation of production. The portfolio of net premiums totaled $439.2 million, an increase of 11.4% over 2007.
The new provisions for calculating Capital Adequacy Ratio will be coming into force in Panamanian banks on April 1.
Assets that under the current rules were weighted at 100%, with the change will be weighted at 125% and 150%.
The general manager of Equilibrium risk rating, Ernesto Bazán, stated in an article in Prensa.com: "This means that assets, as measured by their risk will be higher and, therefore, the capital adequacy ratio of the Panamanian banking system will be reduced globally. It is currently at 14.3% and it could drop to 13.8% or less with the change."
According to Banguat, the banking system has $614.5 million (Q4,747.6 million) in available liquid assets.
"We have insisted that the banks have enough liquidity to meet commitments; that is, they have extra reserves and liquid assets, but in the current situation, they can, as some global banks have done, maintain higher levels as a precautionary measure," the president of Banquat, Maria Antonieta de Bonilla, said.
The measure which was proposed for January 2009 forces banks, financial cooperatives and credit unions to save 15% of their earnings as as protection against risk.
The president of the Central Bank, Francisco de Paula Gutiérrez, explained yesterday that the decision is because national financial market conditions have changed.