Are Peruvian banks the most profitable in the region, and do they need more capital? | economy

It states so Moody’s Investors ServiceThis implies that a new framework of capital requirements will be applied over the next four years.

Peruvian banks are among the most profitable in the region and their commitment to strategic planning ensures that most of them are already meeting new requirements and additional capital buffers. For the local banking system, the company says.

Banks in Peru, especially the biggest ones, stand out for their profitability, which is based on how efficiently they manage their businesses, said Luis Marin, head of financial regulation at Porto Legal.

Moving to a Basel III-like regulation is beneficial for Peruvian banks, as the regulatory framework of the local banking system will be aligned with the standards set by this international agreement. In addition, Moody’s notes that this will help strengthen its financial stability and improve the credit and loss absorption capacity of banking institutions.

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Which banks will need capital injection?

The country’s largest banks exceed the minimum Tier 1 capital requirement – shares, reserves, subordinated securities, among others – of 8.5%, and only some small and medium-sized banks require capital injection. The transition period is four years, he maintains.

“The Peruvian financial system is very stable, while the largest banks are exceeding the capital requirements demanded by the regulations. The needle will not move much if more requirements are established now.”, Marin argued.

In general, Moody’s asserts that local banks have the earning capacity to maintain the necessary equity buffers.

He describes Peru as the last of Latin America’s largest economies to adapt its capital requirements to Basel III.

However, it highlights that Peru’s new capital regulations are among the strictest in Latin America and comparable to the rest of the world.

“Basel III requires banks to have additional capital requirements to be used in certain cases. “It’s like asking to save bread for May in the face of any risk or market volatility,” Marin said.

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