The fiscal stability of Colombia together with the deterioration of the portfolio are two of the main risks that the financial system will face in the next two years.
(Read: ‘Difficult times’: the challenging start of 2025 for the Colombian economy).
They established it 112 entities consulted by the Bank of the Republic in the PERCEPTION SURVEY ON RISKS OF THE FINANCIAL SYSTEM held in December 2024.
In any case, when investigating the level of confidence that participants have on the stability of the financial system in the next twenty -four months, as in previous editions of the survey, most entities indicated maintaining a high level of confidence.
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The report made by Diego Fernando Cuesta, Camila Gamba and Eduardo Yanquen, members of the Financial Stability Department of the Bank of the Republic and whose opinions do not reflect the position of the Bank of the Republic or the Board of Directors, contains responses from 25 banks, 12 financing companies (CFC), 2 Financial Corporations (CF), 4 Financial Cooperatives, 2 Pension and Cessation Fund Administrators ( AFP), 22 insurance companies, 8 stock exchange societies (SCB), 13 Fiduciary Societies (SFD), 9 Special Official Institutions (IOE) and 15 non -financial institutions (INF).
Concern for fiscal sustainability was positioned as the risk most indicated by respondents in this edition, with an average participation of 32.1%, which represented a significant increase against what was recorded in the two previous surveys.
For its part, the deterioration of the quality of the portfolio, which had remained the main risk between the surveys of December 2022 and June 2024, in this version lost prominence.
In addition, the concern about the inflation rate climbed a position within the risks indicated.
Finally, the political uncertainty and the performance and stability of local economic activity presented a slightly lower incidence against the previous two periods.
Regulatory changes
It is emphasized that, despite not being within the five main risks, the entities expressed as the sixth relevant risk the possible pressures on the financial system from the entry into force of regulatory changes.
When analyzing the responses by type of entity, for the banking sector the main risk mentioned was the possible pressures on the financial system from the entry into force of regulatory changes, which was indicated by 40% of the banks.
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Followed by this, concerns about the deterioration in the quality of the portfolio, the inflation rate and political uncertainty were located as the most relevant, with an individual participation of 32% in each case.
In addition to the previous risks, some banks expressed concern about the speed in the decrease in the monetary policy rate of the Bank of the Republic, macroeconomic deterioration and tax sustainability.
Likewise, the main sources of risk was inquired in terms of potential impact and probability of occurrence and the survey showed that the risk that would be perceived that the greatest potential impact on the performance of the financial system would have continued to be the deterioration in the economic landscape of Colombia, which decreased 8.9 percentage points (PP), to 43.8%, from the measurement of June 2024 when its historical maximum value had been observed.
Additionally, Credit risk materialization occupied second place, presenting a decrease of 5.2 pp, which led it to a 9.8% level.
Colombian financial system
Time
Political risk
On the other hand, the internal political risk and the fall in investor trust continue to be located as the third and fourth risk most indicated by the participants.
Some risks that gained importance were the departure of capital given the uncertainty of internal and external conditions, the fall in the price of financial assets and others, among which the fiscal risk and the fall of the usury rate are mentioned.
A particular fact expressed by non -financial institutions in the survey is the loss of confidence in regulators.
Likewise, when asking financial entities about the risk that would most affect their performance in the face of possible materialization, that is, which are more vulnerable, the most relevant risks are maintained for IFNB, but change for ECs. In this way, for ECs the materialization of credit risk continues to be the most important, however, the deterioration in Colombia’s economic scene now shares the second place together with the restrictions in the sources of funding.
Additionally, the risk of liquidity problems in the short term was located fourth.
On the other hand, the IFNB maintained the deterioration in the economic landscape of Colombia in the first place, and continue to report as second in importance the fall in the price of financial assets.
In this edition of the Bank of the Republic survey, third place is occupied by the internal political risk.
They trust the sector’s performance
The perception of the participants of the survey on the probability of occurrence of an adverse event in the short or the medium term decreased. For the two time horizons, a
decrease in proportion that considers that the probability of occurrence is high or very
High, while those who consider that the probability of occurrence is low or medium increased.
Most entities said to maintain a high and very high level of confidence (more than 75%).
In addition, the evolution of an indicator of confidence of the Colombian financial system was presented, which remained relatively stable during the last six months and was located at levels similar to the average of recent years.
Holman Rodríguez Martínez
Portfolio
