Due to some very serious Social political crisis all the bank in Nicaragua are closed. Given the massive leakage of deposits and the strong increase in the portfolio at risk, which has reached record levels, the national banking has decided to address these consequences of the socio-political crisis, among other measures, closing 37 branches and windows between April and November of the year past and dismissing more than three hundred employees.

With this, the sector ended several years of growth and expansion to the detriment of banking and financing to productive activities.

According to reports of the financial indicators published by the Central Bank of Nicaragua in April 2018, the portfolio at risk represented 3.33 percent of the total portfolio of the entities that form the National Financial System (SFN) – six banks and three financial institutions – but to November this increased to 9.79 percent.

The increase in the portfolio at risk would partly explain the endless lists of borrowers who are in arrears in newspapers of national circulation. In the publications, the SFN entities call on thousands of companies and natural persons, with loans in arrears and / or judicial collection, to fulfill their credit obligations.

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Few Nicaraguans deposit their money in the Central Bank

“The results are not surprising. Since the beginning of the crisis Funds (Nicaraguan Foundation for Economic and Social Development) has been monitoring the system’s indexes and has noticed a sustained increase in the portfolio in arrears or at risk. This increase is explained by the decrease in employment and economic activity that makes it difficult for debtors to honor their obligations, “explained Funds executive director Juan Sebastian Chamorro.

According to banking industry experts, the estimated 4 percent drop in Gross Domestic Product (GDP) last year hit both consumption and investment; this caused an alarming credit deterioration that will affect not only the SFN.

Normative did not stop an increase in arrears

At the end of May 2018, the Superintendence of Banks and Other Financial Institutions (Siboif) approved a regulation that allowed banks and financial institutions to restructure or extend credits to people who, due to direct or indirect effects of the socio-political crisis exploded on April 18, face difficulties to honor their commitments.

Nicaragua’s Insurance Market Eonomicic recession

However; the provision that expired on December 31 did not prevent delinquency and, according to sources close to the bank, despite benefiting some clients was not as effective as expected. Since it was issued consumer rights organizations warned that this would not help at all to unemployed debtors or their closed companies.

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“The SFN is under financial stress, which is reduced by a decrease in profits, an increase in provisions for bad credits and a decrease in return on equity,” explained one of the specialists.

To counter these pressures, according to the BCN report, between April and November, the entities of the system closed 37 branches and windows, most of them in the interior of the country.

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In April, there were 612 branches and bank windows with 11,484 workers; of these, 267 were located in Managua and 345 in the departments.

In November 575 branches were reported, 251 of them located in Managua and 324 in the departments. In the period of reference also reduced 364 jobs in the sector, since in November only 11,120 workers were reported.

“The financial system has substantially reduced its credit portfolios, whose growth closed negatively in 2018. When it decreases its activities, it is expected that they will reduce operational costs, which go through the closure of branches or windows, beginning with those of smaller volume and profitability, “said Chamorro.

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Credit contracted more at the end of 2018 in Nicaragua

According to specialists, the closure of branches or windows and the reduction of personnel would allow the institutions of the system to remain in the area of ​​profitability. However, they warn that “by now the most dangerous thing for the bank is the progressive deterioration of the portfolio”, as long as the crisis persists there will be no way to stop it and in the near future can provoke a major crisis.

The leakage of deposits

1,373 million dollars in deposits came from the National Financial System (SFN) between April and October of 2018. 987 million were withdrawn in dollars, while in Cordoba’s the equivalent of the remaining 386 million dollars came out. You can find more details for latest news and technology by visit Microsoft Top

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