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 banking regulations.
"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% pay 25%.
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
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 them."
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." LF