Challenges for Bolivia’s banks
November 11, 2013
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 LatinFinance.
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 and
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
“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 encourage
“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