Colombia regulator urges banks to use earnings on account of loan portfolio deterioration

© Reuters. The facade of a bank is roofed with wood sheets, in the future forward of a national strike in Bogota

BOGOTA (Reuters) – Colombia banks are being requested to use shut to 68% of the earnings they made in 2020 to raise property in the face of an anticipated extra deterioration of their loan portfolios this year, the country’s banking regulator mentioned on Friday.

Monetary institution earnings plummeted 55.3% final year to 6.1 trillion pesos ($1.7 billion) thanks to adjustments made to administer debt that modified into as soon as previous due by extra than 30 days.

Previous due debt totaled 5.4% – such as about a 26.5 trillion pesos – of all debt on banks’ balance sheets in 2020, properly above the realistic for the final decade. The kind is anticipated to continue this year.

“This may per chance well perhaps no longer be a truly easy year through easing of risk, the portfolio will continue to deteriorate and it be pure that may per chance happen in share with a proceed between the behavior of the economy and the behavior of consideration to (debt) obligations,” mentioned Jorge Castano, the head of the Superintendency of Finance.

“While we’re unsure how it would alternate in the long bustle, it’s miles prudent at the present no longer to distribute these dividends, to leave that money within the entity so it’s going to toughen unexpected loss,” he added.

Banks, supported by the central bank and the authorities, believe opened credit opportunities for folk and corporations amid the coronavirus pandemic and connected shutdowns.

Banks had loan loss provisions of 39.7 trillion pesos at the shut of 2020, Castano mentioned, extra than the amount of unhurried debt, which suggests the sphere stays solvent and willing to make credit in a reactivating economy.

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