The total delinquency rate was 3.12% of the loans granted by private banks until January 2023. It is an increase of 0.8 percentage points compared to January 2022 (2.32%).
The increase is minimal despite the fact that banks must register and declare, as of last January, the portfolio as overdue 31 days after the debt becomes delinquent. Until December 2022, it was established that it be declared after 60 days due to the impact of the pandemic.
Before the pandemic, each credit segment had a specific time in which banks recorded the default on their balance sheets. In the case of consumer and microcredit it was 16 days. The productive one, at 31 days; and that of housing, at 61 days.
With the pandemic, measures were established such as the extension of the term to declare the debt as overdue and thus give banks balance sheets so that they can reach payment agreements with their clients and make provisions. “This happened in almost all Latin American countries,” says Andrea Villarreal, director of the Economic Department of the Association of Banks of Ecuador (Asobanca).
The resolution of March 2020 provided that the arrears be registered and declared, in all credit segments, after 61 days. With this, the increase in arrears in the midst of the economic crisis generated by the restrictions during the pandemic was not evidenced in the official figure.
The Financial Policy and Regulation Board determined that it was time to return to the standards and times that existed before COVID-19, then he arranged that the consumer and microcredit segments declare default 30 days from January 2023, as well as the productive one. The housing one continues after 61 days.
Asobanca’s forecasts were that the default would increase, since the time to declare it was reduced.
The non-performing portfolio increased more in the microcredit (1.93 percentage points), educational (1.48 pp) and consumer (1.40 pp) segments, during the last year.
The increase in this arrears will require a higher level of provisions within the banks’ balance sheets.
What are the provisions?
They are all that the banking entities put with their own resources to cover the probability that the overdue portfolio is not recovered, Villarreal affirms.
”The number one job of banks by constitutional mandate is to safeguard resources, in the event that a person enters into default, what the entity does is that it begins to cover with its own resources to mitigate this probability that the debtor does not pay. If time passes and the person never paid, the bank ends up restituting its own resources, provisioning 100% of the unpaid counterpart. The more time passes, the provision increases because the probability of the debtor coming to pay is reduced, ”says the specialist.
The bank coverage ratio, expressed through the relationship between portfolio provisions compared to the non-performing portfolio, reflected a ratio of 2.2 times at the end of January 2023.
He Total provisions recorded an accumulated balance of $2,676 millionwhile the unproductive portfolio was $1,201 million, therefore, in January the level of portfolio provisions was $1,475 million higher than the balance of unproductive portfolioindicates Asobanca.
The coverage decreased since last November the provisions were 2.8 times more than the total past-due portfolio.
The balance of the gross credit portfolio granted by private banks was $38,534 million in January 2023, of which $23,080 million (60%) were allocated to production (productive segment, housing and microcredit).
Credit for consumption was $15,454 million, 40% of the total. The financing granted in January of this year meant $4,785 million more than that assigned in the same month of 2022, an increase of 14.2%. (YO)
Source: Eluniverso
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