The reins of financial institutions are released

Ecuadornews:

The liabilities of private banks, composed mainly of deposits from the public, are the cause of the fall in interest rates, an effect that will also continue throughout 2018 under the current circumstances.

At the end of 2017, these liabilities totaled 34,757 million dollars, or 34% of the Gross Domestic Product, enough money for banks to compete to place what they have. For this reason, it is not uncommon for your cell phone to be called by an operator of the call center to increase your quota on the credit card.

And not only that, but a longer term and less interest. It is just the interest rate for consumer loans that has fallen the most, 2.14 percentage points in 2017, even more than the safest credit: housing. The Central Bank of Ecuador calculates weekly interest rates based on the information sent by financial institutions on Thursday of each week.

For February of the current year the maximum rate is at 17.30, but at the end of 2017 the bank charged an implicit active rate of 12.36%; the lowest in the microenterprise sector was set by the authority in 23.5%, in relation to 21.28% of the market. The real estate and the commercial also fell.

The bonanza caused that the year that finished recently brings the results of the set of private banks of the country to levels never seen before: 396 million dollars. They were nothing less than an additional $ 174.1 million (78.44% more) compared to 2016. Data from the Superintendency of Banks detected high profits in Diners, with 45.59 million dollars, but no bank like the Pacific: $ 70.2 million, a figure never achieved in its history.

Diners Club enters the ring

The arrival of a new tenant in the neighborhood of private banking broadened credit operations and increased their profits.

Data from the Superintendency of Banks indicate that the incorporation of Diners, the most important credit card, incorporated 1,325 million dollars to system liabilities and 1,674 million to assets.

Héctor Delgado: “This is good with controlled risk”

The expert in financial matters knows where all this leads: to also that the user can access more easily to a financial product: either a credit card or a bank account. That is, a credit history is being created.

Is high liquidity alone the cause of falling interest rates?

In fact, banks when they have a lot of liquidity tend to lower their rates. That is why even since the beginning of 2017, all banks have started with a policy of decreasing rates on term deposits (deposits), as well as aggressive on the issue of loans because they have a lot of money.

And that still happens?

This still happens. We have found banks that were not accustomed to grant a lot of credits, they were restrictive, and now they are giving it away, so to speak, with topics such as increases in the number of credit cards, longer terms, low rates.

That’s obviously good for the economy. 

That’s good, but you have to be very careful, because these are cycles. Now that there is liquidity they may be giving a lot of money, but they also have to take care of the past due portfolio. They also have to see to whom they give the credit.

Does that merit greater supervision of the Superintendency? 

The Superintendency reviews the indicators of each bank every month, because the large, medium and small banks are different. In the small ones the delinquency is higher because as the portfolio is small, a large client or two that do not pay affect their indexes.

The important thing is also that the private banks have self-control? 

The problem is when you start giving credit without controlling the risk, without measuring it, but if the policies are good there is no problem.

What will banks do now to put all that liquidity? 

The trend in the world is to invest in technology. They are focusing on investment. All this is a benefit for the user, who is much more educated. The expert in financial matters knows where all this leads: to also that the user can access more easily to a financial product: either a credit card or a bank account. That is, a credit history is being created.

 Is high liquidity alone the cause of falling interest rates? 

In fact, banks when they have a lot of liquidity tend to lower their rates. That is why even since the beginning of 2017, all banks have started with a policy of decreasing rates on term deposits as well as aggressive on the issue of loans because they have a lot of money. (I)

Source: http://www.expreso.ec/economia/se-sueltan-las-riendas-de-las-instituciones-financieras-GF2034855