Local financial system accelerates use of external credit lines in 2022

However, in 2022 the local financial system resumed the use of external lines, and so far this year it is even accelerating the taking of these funds in international markets.

Thus, last March the external liabilities of the banking sector increased by US$480 million (US$122 million in the short term and US$358 million in the medium and long term), according to data from the Central Bank (BCR).

With this, the accumulated balance of foreign credit lines of banks, at the end of the first quarter, amounted to US$ 10,268 million, an amount 18.3% higher than that reported in the same period of the previous year (US$ 8,674 million).

These figures reveal an acceleration in the rate at which local banks are using external liabilities, since in all of 2022 the growth of these funds was only 8.6% to an accumulated balance of US$ 9,891 million.

READ ALSO: Dollar falls for the third month in April, will it drop to less than S/ 3.70 in May?

What explains the increased use of external credit lines by banks?

Sergio Urday, professor of Economics at the UPCrefers to the fact that the increase in local bank deposits slowed down since last year, among other reasons due to the Withdrawal of the CTS -provision that has been in force since 2022-.

This has caused the banks to recompose their funding structures (funds that are later used for the placement of credits), resorting to more external resources, he said.

In addition, another factor that explains this dynamic is that despite the fact that the Federal Reserve (FED) has raised its interest rates, rates in dollars continue to be lower than those in soles, he added.

The expert details that financial entities use these foreign funds mainly to offer financing lines to clients linked to the foreign trade sector and, to a lesser extent, to other companies that, considering the situation of the decline of the dollar against the sun, decide to borrow in the foreign currency.

In the year, the price of the dollar fell 2.55% against the sol to S/ .3.71.

Walter Leyva, a postgraduate professor at ESAN, states that a first reason for the increase in external liabilities by the local financial banking system is that they are now seeking to strengthen their assets.

In this sense, financial entities are taking credits from abroad as subordinated debts, because the latter can be used to calculate capital, he added.

Dynamism of loans in dollars

In addition, he indicated that as the dollar credits are gaining dynamism, banks are requiring international credit lines to meet the local demand of companies for financing in foreign currency. Last February, loans in dollars to companies grew at an annual rate of 11.8%.

“It must be taken into account that when banks work on the issue of matching, both currency matching and term matching, they tend to take funding lines that fit perfectly with the demand for placements (of credits in dollars). Therefore, if they have demands for loans in dollars, it is understandable that they also have funds in that currency”, Leyva commented.

He said that not only companies in the export sector are requesting loans in dollars, but also agro-export companies and textile companies. And this will grow more if economic activity improves, he estimated.

READ ALSO: Large companies increase their preference for borrowing in dollars and leave the soles

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