Boletín Monetario y Financiero

During the third quarter of 2001, the outlook for lower global growth intensified, particularly on the back of signs of a marked slowdown in the United States economy, which deepened after the terrorist attack in early September and the high uncertainty that followed. Although the context forced the monetary authorities of the main monetary economies to continue easing their policies, the growing perception of risk ended up restricting emerging economies’ access to international capital markets
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Apart from the vicissitudes of the global economy, the national economy was strongly conditioned by adverse events of domestic origin. In fact, the main indicators of the real economy continued to reflect the deepening of the local recession, maintaining the trend of greater deflation and lower level of employment. But the central variable turned out to be the worsening of the short-term financing problem of the national public sector. This forced the establishment of a zero fiscal deficit plan, although the achievement of its goals was conditioned by the decrease in current revenues of the treasury. The prevailing strong uncertainty was reflected in a significant decrease in deposits and pressure on reserves, while the prices and volumes traded in the capital market showed a negative trend.

Monetary variables showed a declining trend with a turning point at the end of August, giving way to a slight recovery. The fundamental explanatory variable was smaller time deposits: in the face of the adverse situation, initially the general public opted, no longer to dollarize their deposits, but to withdraw them from the system. A scenario of illiquidity and high interest rates was then configured that negatively affected the system’s international reserves and forced financial institutions to cancel loans to the private sector. The Central Bank acted by relaxing its minimum cash regulations and liquidity requirements, in addition to granting loans and rediscounts. A certain recovery in deposits was observed from the last days of August and an improvement in the support of monetary liabilities during September.

The forced change in the level of bank intermediation altered the set of risk indicators of the banking sector. Portfolio quality showed a certain deterioration that, although generalized, was concentrated in the largest banks. The increase in charges for uncollectibility, together with the impossibility of adjusting administrative expenses in a context of abrupt disintermediation and losses on public securities, led banks to show a decrease in profitability this quarter, for the first time in the year, although the fall is slight in the year-on-year comparison. Finally, given the fall in assets and the increase in the risk implicit in them, in addition to changes in the respective regulations, the different solvency indicators showed a disparate evolution with respect to the previous quarter, all remaining above the minimum local requirements and international standards. In the particular case of private banking, solvency indicators remained stable or showed slight progress.