Banks Will Be Required
To Increase Their
Reserves
Banks and financial
institutions will be
soon required to
maintain a reserve of
15% of its earnings as a
protective measure
against risks of its
daily operations.
The Superintendencia
General de Entidades
Financieras (Sugef), by
way of the new measures,
seek to ensure that the
banks and financial
intermediaries maintain
a sufficient reserve to
cover any possible
losses arising from its
management.
The new measure goes
into effect June 1 and
requires that banks and
financial institutions
maintain a 15% reserve
based on its average
operating income for the
last three years.
According to Óscar
Rodríguez, SUGEF
superintendent, the
purpose of the
modifications to the
Reglamento de
Suficiencia Patrimonial
de Entidades Financieras,
is so that the system
follows international
guidelines.
This new reserve unites
financial intermediaries
and is a direct way to
strengthen the capital
of banks, commented
Rodríguez.
The SUGEF head added
that the measure is also
a way to indirectly
control the growth of
credit, meaning that a
portion of the resources
the banks now use for
loans will have to be
reassigned to increase
their reserves.
The financial
institutions will have
18 months to comply.
Rodríguez said that if
the measure were to go
into force immediately
it would strongly impart
the financial
intermediaries and that
the SUGEF has other
means available to
ensure a financial
institution strengthen
its position and avoid
possible losses due to
poor administration of
changes in economic
conditions.
The move by the SUGEF is
to strengthen the
country's financial
system. The move is to
allow the financial
institutions to have
greater capital on hand
to face any financial
risk from its
operations.
However, the move could
also affect interest
rates, as financial
institutions have less
capital for loans and
credit, rates are
expected to climb.
Financial experts say
that the state banks
could see a negative
effect on their earnings
due to the change. |
