The bank’s solvency is good, despite the deterioration of the portfolio

Republic Bank It is considered that, despite the slowdown in credit and the gradual deterioration in its quality, The Colombian financial system has levels of liquidity and solvency Not only is it higher than that required by internationally accepted standards, but it will also be sufficient to meet the embodiment of severe low-probability risks.

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In the financial stability report for the first semester source It should be noted that the credit institutions in Colombia have high levels of capital and sufficient liquidity indicators that allow them to face the embodiment of various risks. For its part, profitability has shown a downward trend since mid-2022.

He says that credit has slowed its growth rate in recent months after showing very high rates of expansion, at the same time that larger defaults were noted in the portfolio.

“This dynamic is mainly explained by the consumption pattern and could continue in the first half of 2023The report states.
Ensures that sensitivity exercises related to the collapse of Silicon Valley Bank and other regional banks in the United States “It did not have a direct impact on the local financial institutions“.

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He mentioned it toheSome properties that protect the Colombian financial system It is a conservative balance sheet structure for both the active and passive sides of the entities, the general practice of valuing the investment portfolio at market prices, and adequate management of liquidity risk.
The Banco de la República report warns that household indebtedness remains near an all-time high.

“Household savings have recovered, but remain below pre-pandemic levels. Households have enough liquid resources to cover short-term liabilitiesThe report confirms.

He says that if the portfolio maintains a low growth trajectory, A A decrease in the debt-to-income ratio. Likewise, it reveals that the credit risk indicators of the commercial portfolio are at low levels and a slight deterioration is noted in some sectors.

He says most foreign currency debt to the corporate sector has mechanisms to mitigate exchange risk.

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The report considers that the profitability of non-bank financial institutions has shown a recovery, although it is still below pre-pandemic values.
“Collective investment funds that are open without a standing agreement have shown a decline in their liquidity indicators in recent months, but they are still well above regulatory minimums.Refers to the report.

Stress tests were conducted to assess the resilience of credit institutions in an adverse, extreme and unlikely scenario that takes into account several factors.

among these, Decreased terms of trade due to the drop in the price of oilthe greater realization of the country’s risks, the strong contraction of domestic demand, the increase in unemployment and the gradual liquidation of the public debt portfolio of foreign investors.

(See: April, Best Monthly Record in Foreign Direct Investment.)

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