A Paradox? Asobancaria President Says High Interest Rates "Do Not Favor the Financial Sector"
Amidst the controversy over the unprecedented withdrawal of the National Government from its position on the board of the Bank of the Republic, the debate over the effects of the monetary policy rate on the financial system intensified.
TL;DR
- The banking sector supports the decision to increase interest rates as a necessary measure to control inflation.
- Despite this support, Asobancaria's president, Jonathan Malagón, stated that higher interest rates do not benefit the financial sector.
- In 2023, credit institutions' profits fell by 45%, with 11 banks reporting losses by the end of the year, the highest figure in decades.
- Increased monetary policy rates raise the cost of funding for banks, leading to a reduction in credit demand, an increase in customer delinquency, and higher expenses for provisions.
- Historical data from September 2021 to April 2023 shows that during a rate hike cycle, the loan portfolio contracted, overdue payments increased, and credit institutions incurred significant losses.