Are Past-Due Loans Putting Colombian Banks on Shaky Ground?
Colombia's government will force some of the country's banks to boost their provisions for bad debt because of concerns about an increasing amount of past-due loans, Finance Minister Juan Carlos Echeverry said May 18, MarketWatch reported. The number of past-due loans has grown 26 percent so far this year, said Echeverry. What is causing the increase? Is Colombia's financial services industry on firm ground? Is the government imposing adequate regulations and safeguards on the industry, or is it unnecessarily holding banks back?
"The 26 percent increase in past-due loans might have originated in the manner in which some banks have recently been granting consumer loans. Banks had excess liquidity and the textbook example of what should be avoided happened: banks were granting consumer loans to individuals that did not really qualify to fulfill their financial obligations and were not accustomed to receiving and using consumer loans. Therefore, borrowers started to default. In spite of this, I believe the Colombian financial services industry is on firm ground, growing steadily and still really attractive for foreign investors," said International and Cross-Border Transactions Partner Enrique Gomez-Pinzon.