Banking maintains solvency above the required level, liquidity is better than before the pandemic

Private banking reached a solvency rate of 13.9% at the end of 2022, compared to 13.5% in 2019 and 14.5% in 2020. In the case of public banking, the downward trend recovered last year: it was 37 .5% in 2018; to 36.8% in 2019, to 35.2% in 2020, to 31.7% in 2021 and to 33% at the end of 2022.

The two indicators for public and private banks are higher and above the current required level, which is 9%, indicated the Deputy Superintendent of Banks, Guadalupe Cabezas, during the presentation of accounts offered on Wednesday, May 17.

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The solvency index is measured through the relationship between established technical capital and risk-weighted assets and potential, according to the official.

In the meantime, the Association of Private Banks (Assobanca) explains that in times of greater uncertainty, such as the pandemic in 2020 when the closure occurred, “banks strengthen solvency as a technical measure to cope with these situations and give it greater strength to the system and thereby strengthen the trust of their clients. The banks are doing their job well,” commented its CEO Marco Rodríguez.

Other indicators presented by the deputy chief were liquidity and financial returns.

He explained that within the evolution of liquidity, understood as the ability to respond to short-term obligations or assets that quickly turn into cash, in the case of private banking there is a slight growth between 2021 and 2022, since it reaches an indicator of 28.9%, compared to In 2018 and 2019, it is also higher. Meanwhile, public banking saw a slight decline last year, closing 2022 at 43.9%. In 2019, it was 19.8%, and in 2020, it was 40.3%, according to data presented in accounting.

As for the evolution of the results, the official stated that in 2022 the results of private banking had a growth of 71.3% compared to 2021, and exceeded the profit recorded in 2019, the year before the pandemic.

For their part, public banks made a profit higher than 2019 and recorded a growth of 152% last year, concluding with a profit of 105 million dollars.

Regarding indicators, return on assets (ROA) and return on equity (ROE), Cabezas said public banks recorded ROA levels of 1.5%, higher than the 1.2% registered by private banks at the end of 2022.

On the other hand, as far as ROE is concerned, he stated that it reached 12.2 percent for private banks, while for public banks he closed last year with an indicator of 4.4 percent.

ROA refers to economic profitability, while ROE measures profit for the year relative to equity.