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The liquidation process of Banco Ahorro Famsa begins. Consumer loans are no longer driving total private sector financing. Bank deposits reverse the weakness shown since the second half of 2019.
The impairment of the employment and income indicators stemming from the COVID pandemic has brought questions about the health of banks. Despite the complexity of the current situation, it should be noted that the fundamentals of the banking system as a whole show strength to face the economic consequences of the pandemic.
Last Thursday, we learned that eurozone banks requested a large amount of liquidity (EUR 1.3 trillion) from the ECB's fourth TLTRO III operation.
The momentum of non-financial private sector credit is partly based on the accounting effect of exchange rate depreciation. Companies use their credit lines to cover liquidity needs in face of the health emergency. Consumer loans are no longer driving total private sector financing.
The Board of the Central Bank decided to maintain the monetary policy rate at 0,25% in June. The Bank renewed its commitment to maintain a strongly expansive stance for a prolonged period and showed greater concern for inflation, estimating it will fall below the target range this year.
In May, Lima's Consumer Price Index rose 0.20% m/m, above market expectations (Bloomberg Consensus: +0.04%). With May's monthly result, year-on-year inflation accelerated slightly to 1.8%YoY, from 1.7%YoY the previous month.
Commercial banking leads intermediation of deposits and credit to the private sector. In the first quarter of 2020, the percentage of companies that received bank credit increased. Commercial banking has the solvency required to continue granting credit and overcome possible losses.
May 29, 2020
Peru | Measures to contain the spread of COVID-19 significantly affected output in 1Q20
GDP strongly contracted in the first quarter, reflecting the measures implemented since mid-March by the Government in order to contain the spread of the new coronavirus.