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Fitch: Latin American Bank Capital Ratios Adequate
September 4, 2014 / 2:53 PM / 3 years ago

Fitch: Latin American Bank Capital Ratios Adequate

(The following statement was released by the rating agency) SAN SALVADOR, September 04 (Fitch) Latin American banks are generally adequately capitalized, although the lower risk weights in some cases support capitalization ratios, reflecting differences in the risk weights applied to assets, according to a Fitch Ratings report. 'Capital ratios in Latin America are at comparable levels to other emerging markets, despite rising leverage resulting from high loan growth in some of the largest markets,' said Franklin Santarelli, Managing Director at Fitch's Financial Institutions Group in Latin America. 'Risk-weighted capitalization is at comparable levels to other regions, but some countries benefit from low capital charges on local sovereign debt and certain loan classes. Conversely, stronger coverage ratios increase loss absorption capacity by reducing the stock of low-quality assets.' Asset risk weights in Latin American markets tend to be broadly in line with international standards, but some differences apply in regards to loans and other assets. Similar to the trend of many Europeans countries and within the BIS III framework, most regulators have adopted the option to risk weight at zero percent of their own sovereign exposures. BIS III capital rules have become the benchmark for assessing capital adequacy globally. However, progress in Latin America in complying with BIS III is uneven. Brazil, Mexico and Peru are at the forefront of adopting BIS III regulations. Regulators across Latin America are adopting BIS III standards, albeit at different paces. Regulators in Brazil and Peru have set out clear paths to comply fully with BIS III regulations by 2019, while Mexico has fully implemented the new platform. Fitch expects most Brazilian and Peruvian banks to comply with the new requirements through internal capital generation. In Mexico, all banks are already in compliance. Nevertheless, loan growth is likely to remain strong in these markets, and Fitch expects profitability to be slightly lower than historical averages. Therefore, long-term capital planning by banks will be of higher importance going forward. Fitch believes capital should be enough to satisfy BIS III in countries with BIS II and BIS I frameworks, as it is already of high quality. For more information, a special report titled "Understanding Latin American Capital Ratios" is available on the Fitch Ratings web site at Contact: Luis Ayala Associate Director Fitch Ratings, Inc. San Salvador, El Salvador +503 2516 6622 Esin Celasun Director Rio de Janeiro, Brazil +55-21-4503-2626 Franklin Santarelli Managing Director New York, NY +1-212-908-0739 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at ''. Applicable Criteria and Related Research: Understanding Latin American Capital Ratios here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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