Asobanp: Financial System on Road to Recovery

Nicaragua's financial system is on the road to recovery after two difficult years of government interventions and a weak economy, the country's private bankers association (Asobanp) executive director Marco Antonio Narvaez told BNamericas. Narvaez believes next year will be a good for banks and finance companies because the economy is back on track and the insecurity surrounding November's presidential elections is over. The government predicts the economy will return to the annual growth rates of 5-6% registered during the 1995-1999 period. During the last two years the economy grew 2-3% annually. Asobanp estimates that financial institutions' lending could grow some 10% in 2002 due to the improved economic environment. However, this year lending is likely to decrease due to bank interventions and sluggish economic activity, he said. During 2000 and 2001 the number of banks in Nicaragua fell from 11 to six as a result of four interventions and one merger, Narvaez said. Nicaraguan banks Interbanco and Banco del Cafe were intervened due to irregularities and fraud, while Banco Mercantil and Banic went into receivership because of liquidity problems and runs on deposits, he said. The six survivors are all solid and meet regulatory norms. These standards have been reinforced over the last couple of years to strengthen supervision of the financial system, and the banking regulator has received assistance from the IMF, the World Bank and the Inter-American Development Bank. Narvaez believes Spanish and US banks could be interested in establishing a presence in Nicaragua over the next couple of years to expand their footprint in Latin America. Asobanp sees Nicaragua's financial market as attractive for foreign banks because margins are still very high and there are still unexploited market segments. Mortgage lending and building loans are segments in which the foreign banks could do good business because there is pent-up demand for housing in Nicaragua, he said.