Raise the TRe, the reference rate that can make loans more expensive

The reference rate (TRe) in national currency continues its upward trend, which it can make more expensive the credits in bolivianos that companies obtained and natural persons.

According to reports from the Central Bank of Bolivia (BCB), the reference rate – which is calculated monthly – ranged between 2.65 and 2.91% in 2020, between 2.90 and 2.98% in 2021, and between 2.94 and 3.08% last year. The current rate for February is 3.02% in national currency.

The TRe for February is lower than that of January and that of the end of the management passed, reported the issuing entity. “This behavior was the result of the decrease in the relationship of financial costs of banking entities with respect to their deposits, according to the current calculation methodology of this variable”, he explained.

The TRe is an average rate taken from the interest rates paid by financial institutions for public deposits, either savings or fixed-term deposits (DPF).

The rise in the reference rate means that the banks; for example, they find themselves paying more for the savings and DPF they receive, and has the effect of increasing the interest rate of all loans, except productive loans and social interest housingwhich are in a regime of fixed rates regulated by the Government and which represent more than 60% of the loan portfolio of the financial system.

And which one is it the effect of this adjustment in the TRe on non-regulated credit What do borrowers pay? As an example, a person who bought a vehicle pay Bs 1,486 per month to cover your credit, Bs 1,143 for principal and Bs 343 for interest at a fixed rate of 5.99%; but if a TRe of 3.03% is added, the amount that will be paid for the interest will rise from Bs 343 to 516. That, plus the principal, raises the monthly fee to Bs 1,659.

According to experts, the increase in the reference rate responds to the need of financial system entities to capture more savings of the public. This need originates mainly from the competition that the sector faces from the titles of the General Treasury of the Nation in the stock market.