Safer Banks in Latin America

CEIC Macro Watch: While Latin American countries have been relatively unaffected by the insolvency concerns of their European counterparts, high, mostly double-digit, growth of domestic credit (with Mexico being among the notable exceptions) has raised the relevance of the capital adequacy ratio (CAR) and non-performing loans (NPL) ratio in evaluating the robustness of the Latin American banking system. Latin America has seen substantial improvements compared to the late 2000s, when NPL ratios were in the double-digit range; exceeding 20% in Paraguay and hovering dangerously around 20% in Bolivia during 2002, while Uruguay saw NPL ratios above 30% during parts of 2002-2003. Relatively high CARs also suggest that these Latin American banks are likely to withstand potential banking sector fallout – the CAR of banks in Argentina, Brazil, Mexico and Peru are 14.1%, 16.9%, 16.2% and 14.5% respectively as of June2013. Acceptable level of CAR differs country by country, although Basel II requirements recommend a minimum capital of 8% to risk-weighted assets that is currently met in all Latin American Countries where data is available. By Ian Lim in Malaysia - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
31st October 2013 Safer Banks in Latin America

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