Banking sees a near reduction in credit, also a product of the drop in deposits experienced by the Ecuadorian economy. According to the matrix of the banking cycle, at the moment the bank is in quadrant 1, which is the”bonanza”, but is approaching in a “dangerous” way to quadrant 2 (with more credit than deposits), according to Julio José Prado,president of Asobanca (Association of Banks of Ecuador), to evaluate this year.
Is that the growth of both loans and deposits has been falling. Savings deposits went from an annual growth of 6.9% in October of 2017 to one of 3.1% in October of this year. However, in the forecast of Asobanca, that growth will be reduced to 1% or 2% by the end of the year.
Meanwhile,in October 2017, the average loan growth stood at 23.2%, for the same month, in this year, it is at 13%. By the end of the year it would reach 11%.
The problem is due to lack of liquidity, says Prado. This problem is not new, but in the past, the previous government arranged the issue with liquidity injection through “expensive debt”. Now, the injection of liquidity could depend on reaching an agreement with the International Monetary Fund(IMF), which may be accompanied by more adjustments.
Faced with the need for greater liquidity, the bank proposes reforms to the Monetary and Financial Code in order to attract financial capital from abroad.
For Prado, the issues to be reformed should revolve around liquidity ratios, more competitive interest rates, shareholders, dividends, assets abroad, and others.
The leader says that there is deterioration in international reserves. This is not convenient in case of a shock like in 2015.
Here called that in 2008, the amount of reserves with respect to the Gross Domestic Product (GDP) was equivalent to 10.5%; In September 2014, when the shock arrived, the reserve amount was 3.5% and now we are at a level of 2.5%.
However, he believes that although there will be even a contraction of the economy in mid-2019, the situation will not be more serious than in 2015.
José Hidalgo, director of Cordes, says that the gap between loans and deposits has been narrowing in recent months due to the effects of lower liquidity. At the moment, that gap is 9 points. A year ago, the difference between loans and deposits was 16.
In any case, for Hidalgo, the bank will not be able to maintain the level of credit because there is no longer enough liquidity. This means that a contraction could be generated, but explained that prudence in management is necessary.
On the possibility of access to foreign credit for banking, said that the Law of Productive Development exempts companies that hire loans to pay 5% of the taxon the exit of foreign currency (ISD), which is positive. The problem is the country risk that makes credit more expensive. (I)