They warn of liquidity risk, due to inflation and rising interest rates
He rising interest rates not only causes A rising cost of creditAlso paste into resourceIt is, in the lack of liquidity continue the dynamism of financing, informed Alejandro Valenzuela del Río, CEO of Banco Azteca. In fact, the effects were seen not only in borrowers, but also in financial institutions, especially those that did not adequately match their balance sheets, he pointed out in an interview with The Herald of Mexicoin front of the 86 Banking agreement.
Thus, given the expected continuity of the increase in reference interest rate speak Bank of Mexicowhich is currently at 11.0%, banks need to be very cautious, careful and prudent when making loans, especially those at variable rates.
This, not only because the ability of customers may be affected, since what strikes them the most is the inflation and not him rate increasebut on the side of the cost that this financing represents for the banks, which could lead them to problems of capital or liquidity.
“For banks, when there is a problem with rising interest rates and they can continue to capture the declines, the financial margin is increased (where the income to lend and to be captured is recorded), but it seems to me like this is a time to be very careful,” he said.
He acknowledged that the the behavior of the economy at the end of 2022 surprised by reaching a growth rate of 3.1%but also continue to do so inflationwhich stands at 7.62% last Februarywhich led to Banxico apply a more restrictive monetary policy.
Moreover, he pointed out, in terms of growth, pre-COVID-19 levels have not yet been reached, so “we still have to keep paddling” to reach it and thus stop the shock that the world has had and resume an expansion that allows for the creation of increased jobs and prosperity.
It is therefore a period of being very careful, careful and cautious on the part of the bank, because its active part, which is credit, will certainly have consequences on the rate increasesaid.
This is starting to show up in smaller companies that used to benefit from a low rate environment, such as financials and techs, which had a lot of very cheap resources for a long time and are now underwater.
In other words, he explained, for a time these companies were financed at 4.0% and lent at 10.0%, which was obviously very attractive, but later, the rate went between 11 and 12%, which put her in serious trouble. no longer matches your balance.
In the case of the bank, the example may be the mortgage creditbecause there were many that were placed at a rate between 7 and 8% over 30 years, because if the institution did not generate a hedging mechanism to match that asset with a liability that would hedge it against that upside risk interest rates, interest, you could become insolvent.
“Imagine that you receive a rate of 8% at 30 years, and that to finance you on the market, it costs you now at least 11%, it already brings a lag, then the banks start to stop you”, he said. -he throws. example.
And it is that, he says, when rates go upbanks, people, businesses, all in general, are more cautious, so the liquidity that was abundant in the low yield market is no longer there, it’s not just a matter of cost but abundance of resources.
This also has the effect of moving resources, because instead of lending to someone at a rate between 15 and 16%, it is better to choose to finance the State at a rate of 11%, which, although lower, is also a safe operation.
LSN
Source: El Heraldo De Mexico
Leave a Reply