Challenges for Bolivia’s banks
Bolivia’s economic growth outlook is welcoming for its banks. The head of one of its largest lenders says the new regulatory environment is not.
Bolivia’s economy is expected
to grow 4% or 5% a year for the next few years, a welcoming
sign for the country’s financial system, which
expects to grow above those levels. However, competition has
picked up and profitability has been squeezed thanks to new
"The main challenge for Banco Nacional de
Bolivia [BNB], and for the Bolivian financial system as a
whole, will be to maintain the healthy pace of growth of the
last years, while adapting to the new regulatory environment,"
BNB chief executive Pablo Bedoya tells
The country’s largest
banks’ return on equity (ROE) has fallen from
around 20%, to 11%, between 2006 and 2011, according to
regulatory data. The change has come in two forms. The first
was a new tax system that came into force at the end of 2011.
The government increased a tax on profits for the
highest-earning banks, from 25% to 37.5%. The higher rate
applies to banks with a ROE above 13%. Those with ROE under 13%
The second is a new set of financial
services laws, approved in August, which were set to come into
effect this month. The new Ley de Servicios
Financieros limits banks’ margins, introduces
more controls and directs banks to increase the availability of
credit to the housing and "productive" sectors —
cattle raising, forestry, oil, gas, mining, manufacturing,
electricity and construction.
The growth potential, and the fact that
the economy is "in pretty good shape" provides some
consolation, Bedoya said.
"Banks in Bolivia are going to have to
intensify investment in expanding branch and office networks,
keep improving their electronic transaction systems and design
new lines of products and services," Bedoya said.
"The whole regulatory environment is
changing," said Fernando Albano, an analyst at
Moody’s. "The government has been working for this
law for more than a year. This is going to change the way banks
do business in Bolivia. Next year may be more difficult for
On the positive side, government
intervention could mean more participants in the banking sector
and more potential customers. Bedoya said he expects an
expansion of geography and services. The GDP growth would
"We believe that the opportunities for
Bolivia’s banking sector are diverse, and our
focus is in the small and medium enterprise segments of the
economy, for they have shown very sound development
indicators," Bedoya said. "Corporate banking is a line of
business that we also presume will have very interesting
progress due to the economic expansion and stability."