Interview : Eduardo Torres-Llosa
What role can syndicated loans play in bridging the country’s infrastructure gap?
EDUARDO TORRES-LLOSA: The year 2017 was marked by political and climatological circumstances that had a negative impact on business conditions. Since then, two aspects have remained the same, namely the need to bridge the infrastructure gap and the fact that sufficient funds exist to achieve this objective. The government began to tackle many of the obstacles facing infrastructure development during 2017, and we can expect many of these bottlenecks to be overcome over the course of 2018. These projects are set to contribute significantly to the development of the domestic economy.
The banking system has the financial capacity and the human capital to participate in the development of such infrastructure projects. Furthermore, the current global environment is conducive to raising capital. There is a clear interest from financial institutions abroad in the issuance of syndicated loans in Peru. The main concern, however, is the viability of public projects and the need for public-private partnerships to be developed in a timely manner.
To what extent is the growth of financial technology (fintech) a challenge for traditional banking?
TORRES-LLOSA: The banking sector has moved beyond regarding fintech companies as a threat, and the relationship between both industries has become cooperative. In fact, banks are trying to imitate the way fintech companies operate, in terms of their toleration of the risks inherent in long-term innovation research and development, their time to market capabilities and their internal organisation.
How can the sector’s digitalisation be enhanced?
TORRES-LLOSA: Digitalisation of the banking industry can be enhanced by investing in big data, multi-channel customer relationship management and internal ecosystems that drive innovation through scrums and agile methodology. Nevertheless, the current regulation of digital banking is relatively more advanced in Peru than in most countries, especially with regard to facilitating financial inclusion, the opening of simplified bank accounts and the use of correspondent agents and biometric identification. This creates a positive landscape for the digitalisation of the banking sector in Peru.
How can private banks contribute to efforts to increase financial inclusion?
TORRES-LLOSA: As the smartphone penetration rate continues to rise, mobile banking plays a key role in strengthening financial inclusion. Private banks have begun a process of cooperative competition that enables the development of mobile banking for the benefit of consumers. Furthermore, continuing the expansion of physical networks through correspondent agents is also a determining factor in decreasing the level of the unbanked population.
What explains the yearly increase of non-performing loan ratios since 2015?
TORRES-LLOSA: For the past three years corporate clients have experienced a slowdown in their sales, this has put pressure on their liquidity and capital expenditure, thereby increasing their delinquency rates. However, new loans are evolving differently because clients have become more cautious. Thus, there is reason to believe that risk premiums and non-performing loan ratios will stabilise, as suggested by expected loss indicators, which signal that the occurrence of late and non-repayment of loans has now peaked. In any case, the sector’s delinquency rate, which is estimated to be 3%, is currently sustainable. In fact, the banking industry’s profitability allows banks to resist such slowdowns of economic activity through financial provisions and capital.
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