Featured Product

    IMF Publishes Reports on Article IV Consultation with El Salvador

    June 07, 2018

    IMF published its staff report and selected issues report in the context of the Article IV consultation with El Salvador. Directors noted that El Salvador’s banking system is well capitalized and very liquid. Recent credit growth to the productive sectors has been encouraging, but further room for healthy credit expansion remains. Directors acknowledged the recent progress made in risk-based and cross-border supervision. To further improve the resilience of the banking sector, they encouraged the authorities to accelerate the adoption of the crisis management and bank resolution draft law, to strengthen the financing of the lender of last resort facilities, and to create a bank liquidity fund. Directors encouraged continued efforts to strengthen the AML/CFT framework.

    The staff report highlights that the banking sector appears solid and credit growth is moderate, but sovereign risk concerns and declining margins are affecting the (mostly foreign-owned) banks. The banking system’s capital adequacy ratio (16.6%) remains well above the required minimum of 12%. The nonperforming loan ratio is 2% and problem loans are amply provisioned. However, abundant liquidity, including due to the lack of viable investment projects, and a declining net interest spread continue to dent bank profitability. Credit growth is moderate at 6% in real terms. The authorities are implementing AML/CFT measures and maintain international cooperation with the U.S. Department of Treasury.

    The report also reveals that progress has been made in risk-based supervision and financial inclusion by approving a new law in January 2017. The authorities should continue to strengthen the AML/CFT framework in preparation for the next round of assessment under the CFATF, in 2022. Efforts could be intensified in the areas of systemic liquidity (adequate funding of lender of last resort), banking resolution and crisis management procedures, cross-border supervision, and data availability. These steps would help promote a sound banking system and expansion of credit to productive sectors, including by limiting excessive liquidity holdings.

    The selected issues report contains a feature estimating the credit gap, defined as the difference between the credit-to-GDP ratio and its long-term trend. In the case of El Salvador, the estimated threshold is equal to 1.43%, lower than the 2% Basel III micro-prudential rule, which triggers counter-cyclical capital buffers. This is currently positive, but declining and below the critical 2% threshold recommended by Basel III micro-prudential guidelines. The assessment concludes that there is still scope for financial deepening without excessive risks for financial stability. Furthermore, an econometric assessment shows that the recent credit growth is not excessive and is aligned to fundamentals.

     

    Related Links

    Keywords: Americas, El Salvador, Banking, Article IV, Capital Adequacy, Resolution Regime, IMF

    Related Articles
    News

    PRA Guides Further on Treatment of Payment Deferrals in CRR and IFRS 9

    PRA published a "Dear CEO" letter from Sam Woods, its Deputy Governor and CEO, to update the March guidance on treatment of COVID-19-related payment deferrals under IFRS 9 and the Capital Requirements Regulation (CRR).

    June 04, 2020 WebPage Regulatory News
    News

    MAS Announces Additional Relief Measures Amid COVID Crisis

    MAS, along with the Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Enterprise Singapore (ESG), announced a package of measures to support those that may face cash-flow constraints.

    June 03, 2020 WebPage Regulatory News
    News

    ESMA Consults on Guidelines for Cloud Outsourcing

    ESMA published a consultation paper on guidelines on outsourcing to cloud service providers.

    June 03, 2020 WebPage Regulatory News
    News

    EBA to Release Data for 2020 Spring Transparency Exercise Next Week

    EBA announced that it will release the bank-by-bank data of the Spring 2020 EU-wide transparency exercise on Monday, June 8.

    June 02, 2020 WebPage Regulatory News
    News

    PRA Issues Statement on Use of E-Signatures to Submit Regulatory Forms

    PRA issued a statement confirming that firms may use electronic signatures for submission of forms and other regulatory documents, although in specific instances PRA may request a "wet signature" where it is appropriate to do so.

    June 02, 2020 WebPage Regulatory News
    News

    EBA to Require Additional Reporting and Disclosures for COVID Measures

    EBA published the guidelines and templates for reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.

    June 02, 2020 WebPage Regulatory News
    News

    FCA Guidance Confirms Support for Mortgage Customers Amid Crisis

    FCA updated its guidance confirming the support firms should give to mortgage customers that are either coming to the end of a payment holiday or are yet to request one.

    June 02, 2020 WebPage Regulatory News
    News

    US Agencies Temporarily Amend Supplementary Leverage Ratio Calculation

    US Agencies (FDIC, FED, and OCC) published an interim final rule that temporarily revises the supplementary leverage ratio calculation for depository institutions.

    June 01, 2020 WebPage Regulatory News
    News

    APRA FAQ for Standard on Margins for Non-Centrally Cleared Derivatives

    APRA published a frequently asked question (FAQ) providing guidance to all APRA-regulated entities in determining their requirements under the prudential standard CPS 226 on margins and risk mitigation for non-centrally cleared derivatives.

    June 01, 2020 WebPage Regulatory News
    News

    EBA Proposes Revised Standards for Own Funds and Eligible Liabilities

    EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities.

    May 29, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5253