Peru’s financial services watchdog SBS has proposed changes to the framework governing how banks establish credit risk in the context of capital adequacy.
A central objective is ensuring that capital levels of financial institutions are better aligned with risk levels assumed.
SBS also proposes modifying the risk weighting for some types of consumer lending exposure, state news agency Andina reported.
The draft changes – out to public consultation until December 21 – would support a strengthening of the solvency of the country’s banking system, Jorge Carrillo, a professor at Universidad del Pacífico’s Pacífico Business School, was reported as saying.
The watchdog’s draft plans are preventative in nature and would involve owners having to inject more capital into their banks or financing companies, he said, adding that those who could not comply would have to consider mergers.
Carrillo forecast Peru’s NPL ratio would be running at 7% in December, as borrower support programs – launched to help consumers and business weather the economic crisis – end. In June, according to SBS data, the bank NPL ratio (loans 90 days or more past due) was 2.6%.
Banks in Latin America may extend borrower-relief programs if circumstances evolve unfavorably, and will likely continue building provisions over the coming quarters as COVID-19 headwinds continue to blow, Moody’s said in a report. The crisis has resulted in higher levels of unemployment and poverty in Latin America.
As of June, consumer loans accounted for 17% of Peru’s banking system loan portfolio and SMEs loans 24%.
Peru is home to 15 commercial banks, a state bank and 10 financing companies, among other types of lenders. As of July, banks accounted for around 505bn soles (US$141bn), or some 90%, of assets.
As of July, the liquidity coverage ratio of banks was 154% in local currency terms and 219% in foreign currency terms. The regulatory minimum of 100% has been suspended since authorities declared a state of emergency.
Moody’s expects Peruvian banks to continue building provisions. Banks are considered solid and would likely receive government support in a stress event.
As of June, banks had a capital buffer of 19.6bn soles, up from nearly 17.8bn soles a year earlier.
THE COUNTRY’S COMMERCIAL BANKS BY CAPITAL ADEQUACY RATIO
The average capital adequacy ratio of Peru’s 15 commercial banks was 14.8% in June. The regulatory minimum is 10%.
Banco BBVA Perú: 14.07%
Banco de Comercio: 13.81%
Banco de Crédito del Perú: 14.80%
Banco Pichincha: 13.55%
Banco Interamericano de Finanzas: 13.88%
Scotiabank Perú: 14.95%