Alejandro Fernández W. highlighted the leading role played by the national financial system in addressing the economic collapse in 2020, resulting from the coronavirus pandemic, and its recovery in the year just ended.
SANTO DOMINGO - 10.7% of the loans granted by private banks last year went to the construction sector, while 10.4% went to real estate activities, according to figures released yesterday by the Superintendent of Banks of the Dominican Republic, Alejandro Fernández W.
According to preliminary figures handled by the institution, the private commercial credit portfolio of the financial system exceeded 740 billion pesos, for a growth of 12 percent in the same period of time.
The share of that amount is led by Trade and others with 25.5%, Industry and Manufacturing 14.8, Hotels and Restaurants 11.4, Construction 10.7, real estate activities 10.4, Financial Intermediation 6.4, Transport and others 4.5, while the Agriculture and others sector 3.4, among other productive activities of the country, which also had access to bank credit.
In that same order, the year-on-year growth of credit was 10 percent for Trade and others, 9 percent for Manufacturing, 17 percent for Hotels and restaurants, while Construction grew by 12 percent, Financial Intermediation by 40 percent and Electricity, Gas and Water by 26 percent.
Fernández W. highlighted the leading role played by the national financial system in addressing the economic collapse in 2020, resulting from the coronavirus pandemic, and its recovery in the year just ended.
He stated that, as a monetary policy, in the face of such an extraordinary and surprising situation, a massive injection of liquidity into the economy was carried out to keep the payment system afloat, and to reduce market interest rates, thereby reducing the economic burdens on businesses and families.
He explained that thanks to these policies, the lowest interest rate levels in Dominican history, both in pesos and dollars, have been achieved in recent years.
The financial official added that there were also elements related to the regulatory flexibility of the way in which loans are rated, and whether or not to penalize a bank for restructuring or refinancing a loan from a debtor of any nature, whether commercial, business or individual.
“The message that was sent, and which we in the current administration have also maintained, is that we have to adjust the burden as we go along, we have to be flexible and recognize the situation that debtors are facing, which is not a matter of willingness to pay, but rather there is indeed an external situation that requires a very significant degree of flexibility, and in fact that is what was achieved,” explained Alejandro Fernández, interviewed by Héctor Herrera Cabral on the program D’AGENDA that is broadcast every Sunday on Telesistema Canal 11.
He insisted that the institution he leads was consistent with the debtors, who are ultimately the ones who make up the assets of financial institutions.
He said that, on the other hand, the signal that was sent, by recognizing that the 2020 numbers would not be the most flattering and representative of the reality of companies and the economy, from there, by decision of the Monetary Board, a series of flexibility measures were taken.
The official highlighted the support given by the financial sector to tourism, one of the hardest hit by the coronavirus, by restructuring their loans due to the cash flow situation they experienced during the pandemic, and granting them a grace period of 12 to 18 months, only paying the interest, until reactivation was achieved.
The Dominican Republic closed 2021 with the lowest interest rate in history
Alejandro Fernández highlighted that, for the past year, the national financial system had the lowest interest rate on loans, both in dollars and pesos, in Dominican history.
The weighted average interest rate, as of December 2021, is 8 percent according to preliminary figures from the regulatory and supervisory body of the national financial system.
He also highlighted the reduction in delinquency, which, according to preliminary figures from the Superintendency of Banks, stood at an average of 1.2 percent in the private commercial sector as of December 2021.
“For example, if you compare the delinquency levels, which is the loan portfolio that is past due, in arrears, not current, and our levels are the lowest in the entire region, and for those loan portfolios that are not current, that are past due, the banks have also been building up provisions and reserves to respond, in a way that is the highest in the entire region, and this is when our numbers are effectively reflecting reality,” he stated.
He recalled that, while it is true that when the pandemic began, during the transition, there was a grace period, a deferral, a postponement of payments on many loans for both businesses and households, from August 2020 onwards everyone began to regularize, normalize, and honor the payment of their commitments, and therefore the delinquency rate is at those levels.
“And in that sense, and it is something I have wanted to emphasize, as superintendent of the banking sector, and in that sense I must speak of the banks as providers, as users, and it has been extraordinary how the average Dominican, from the smallest to the medium and the largest, have honored their commitments in these times of global economic and financial crisis,” said Alejandro Fernández.
He added that “this is something Dominicans should feel very honored and very proud of, because if in addition to an economic, health, and unemployment crisis, we had also had a crisis in the payment system, or a financial crisis, then we not only see that Dominicans continued to honor their commitments, but also maintained their confidence in both the Dominican peso and the national banking system.”.
He also highlighted that “financial savings in the banking system increased in an extraordinary way, to the point that, in relative terms, in relation to the economy, we are among the top five countries in the entire region with the highest savings rate of Dominican households, which is channeled through the banking system.”.
