Peru's financial system has developed and become more resilient since the previous Financial System Stability Assessment (FSSA) was published in 2011, the International Monetary Fund (IMF) pointed out.
However, there are still some challenges to be faced, the multilateral institution indicated in its
latest (FSSA).
In said report,
IMF said the Inca country's major vulnerabilities are external, which are particularly related to the increased number of trade partners (due to reliance on commodity exports), and exchange rate depreciation (due to significant dollarization).
Nevertheless, "Peru is also vulnerable to domestic headwinds, related to uncertainty and spillovers from the ongoing
Lava Jato investigation."
It must be noted these top four financial entities are all classified as domestic systemically-important banks and, therefore, they are subject to an intensive monitoring.
"The mission's stress-test analysis showed that the
banking system is largely resilient to adverse shocks, largely because of banks' initial strong capital buffers and profitability," the fund stated.
Small banks
In the adverse scenario, "all large banks experience credit losses, but initial high capital and profitability help them remain above the minimum regulatory capital adequacy ratio (CAR) threshold of 10%."
In the case of a few small
banks, the CARs fall below said regulatory threshold.
As is known, the overall banking system's profits tend to decrease considerably in an adverse scenario, in which some
banks face losses, "but the aggregate capital shortfall for these banks is modest."
The study also revealed shock affecting credit exposures —which are strongly correlated among large banks— have the potential to become systemic events, given that Peru's banking system is concentrated.
(END) NDP/JAA/MVB