| Economy: Freezing Debts: Ten SBS Reasons for Harm in Saving

The Congressional Consumer Defense Commission approved an opinion that seeks to freeze the payment of credits, in which some adjustments were made.

Given this, the Superintendency of Banking, Insurance and AFP (SBS) explains the reasons for its unfavorable opinion that puts savers, and the financial system in general, at risk, motivating the culture of non-payment.

In the letter sent to the President of Congress, he details these reasons:

1. The measures that allow the reprogramming have already been dictated by the SBS and these reprogramming are currently in full execution. Thus, companies in the financial system have been empowered to modify the contractual conditions of the various types of loans they grant, even without the need to contact each client individually, without this modification constituting a refinance (or deterioration in the debtors’ credit rating), provided that the total term of the aforementioned credits does not extend for more than six (6) months from the original term and that as of the date of the emergency declaration, the debtors are up to date in their payments . This, taking into account the difficulty of users and companies to contact and manage their credits, given the exceptional situation due to the social isolation decreed by the Government.
2. The reprogramming granted by companies in the financial system have been aimed at alleviating the financial burden on clients, in the following maturities via the granting of grace periods, reduction of installments, extension of the term of the credit, which may involve cancellation of late interest, penalties and / or commissions, cancellation of compensatory interest for the grace period, reductions in the interest rate, among others. Thus, 53% of the total consumer portfolio and 43% of the mortgage portfolio have been rescheduled by companies in the financial system, and maintain grace periods with no late fees during which clients will not have to make any payment. , without affecting its risk classification.
3. The greatest urgency and need for these measures occurred during the first months of the social isolation decreed by the government, when the level of economic activity reached historic lows and the default of obligations (not only financial) was general. Passing a law imposing three-month grace periods when the relaunch of economic activities ordered by the Executive Power is already underway, and debtors who received a reprogramming have already started to pay their debts, limits the ability of companies in the financial system to being able to recover their collection levels and, therefore, affects their viability, which represents an obvious damage to their depositors.
4. A fundamental characteristic of the reprogramming that has been applied since March 2020 is that these have been carried out under the provisions of the SBS qThey serve to enable the entity to renegotiate loan contracts with its clientss. The financial system company must bear in mind that the benefits it provides do not prevent it from meeting its obligations to its depositors and other creditors. The responsibility that you have as a public fundraiser is not diminished by the fact of renegotiating the contracts with your debtors assuming months without receiving income (grace periods) or with less or no compensatory interest in the new payment schedules.
5. The treatment proposed in paragraph 3.1 of article 3 of the Reprogramming Bill to establish a grace period of three months and that the balance of the debt be refinanced between “five years and more”, It restricts the debtor’s possibilities of having the most adequate term for his need. Many debtors have agreed with the financial institutions with which they have debt, short reprogramming periods, partly because they are small debts or adding two or three months to the original calendar. On the contrary, other debtors have resorted to rescheduling with up to 80 months of term with total grace periods of up to six months.
6. The Reprogramming Bill according to paragraph 2.2 would only apply to banking companies and financial companies and would exclude companies from the financial system that are mainly dedicated to lending to small and micro-enterprises (Cajas Municipales, Cajas Rurales and Edpymes). If the objective of the standard was to exclude entities that lend to microfinance, the definition is inconsistent with that objective, since it does not take into account entities with a banking company license such as Mibanco, which has a loan portfolio 86% destined to financing small and micro-enterprises. The same occurs with several financial companies such as: Compartamos (94%), Confianza (78%), Proempresa (88%) and Qapaq (55%).
7. A bill that treats companies in the financial system differently according to the license they have (including banking companies and financial companies and excluding municipal savings banks, rural savings banks and EDPYMEs), would be in contravention of the provisions of article 103 of the Political Constitution of Peru that contemplates the issuance of special laws whenever the nature of things requires it, but not because of the differences of the people.
8. The Draft Law excludes the dependent worker from the proposed benefits under the fifth category. However, it is noteworthy that this segmentation criterion is not equitable, since there are people with high purchasing power for income from income other than fifth category, such as dividend income from companies, services, and rental income, among others, who would be included in the Bill.
9. Another aspect that is dealt with in the bill is related to reporting information to the Central de Riesgos. Measures such as not reporting debtors to credit bureaus, as stated in article 4 of the Reprogramming Bill, can cause difficulties in determining the true situation of debtors by companies in the financial system, which would bring difficulties in evaluating rescheduling and refinancing of debtors, and in turn would make it difficult to estimate provisions to adequately reflect the credit quality of the loans and therefore the soundness of the companies. In other words, the entities would operate with a lack of information, with the risks that this brings, which are granting bad loans or restricting loans due to the lack of confidence in the information of the Risk Center (the financial entity would only trust its own information ). Notwithstanding this, it should be noted that the measures ordered by the SBS have allowed that in the rescheduling the debtor’s rating does not deteriorate, as mentioned above.
10. Finally, it is an essential requirement in every bill to evaluate the associated costs and benefits, in order to ensure that the benefits are superior. In the present case, the impact it will have on the affected financial system companies, and consequently on the millions of savers who have entrusted their deposits, must be responsibly evaluated.. Keep in mind that only 1 out of every 10 soles of a loan corresponds to the capital of the financial system company, and the remaining 9 soles correspond to the money of the savers; therefore, with a loss greater than 10% of the value of the assets of a company in the financial system, losses will be generated for savers.

Now its discussion in the Economy Commission and its debate in plenary will be pending, considering that this legislation lasted until July 5.