Asobancaria refutes Minister of Finance, stating interest rate hikes do not benefit the financial system

TL;DR

Jonathan Malagón, president of Asobancaria, disagrees with the Minister of Finance regarding the impact of interest rate hikes on the financial sector.
Data indicates that credit institutions' profits fell by 45% in 2023, with 11 banks reporting losses.
The increase in the Monetary Policy Rate (MPM) raises funding costs for financial institutions.
Higher rates lead to reduced credit demand, increased loan defaults, and higher provisioning costs, ultimately compressing profits.
During the previous rate hike cycle (Sep 2021 – Apr 2023), real loan portfolios contracted by 6.4%, and 23 financial institutions reported losses in 2023.
Malagón acknowledges the Banco de la República's constitutional mandate to preserve the currency's purchasing power and deems rate hikes necessary for inflation control, but rejects the narrative that banks benefit from them.

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