MercoPress. South Atlantic News Agency

Latinamerican banks sound and safe, according to S&P ratings

No juggling with derivatives

Latinamerican banks will see second quarter gains despite the economic crisis due to a greater dependency on deposits rather than loans, Standard & Poor's ratings agency said.

Most Latin American banks ”will end the period (second quarter) with gains, despite the fact that the economic base contracted, which caused a reduction in activities and in the rhythm of growth,“ said a study released in Mexico.

Standard & Poor's analyst Angelica Bala said that ”in the banks that we rate, we don't see problems in any banking systems as seen in the United States, Europe and Asia.”

Latinamerican banks escaped the same liquidity crisis because they did not operate sophisticated lending instruments such as credit derivatives, Bala added.

The private credit sector across Latinamerica represents an average 20% of GDP, compared with around 80% of the Spanish economy and around 100% in the United States. Latinamerican banks would, however, suffer a more severe drop in activity between 2009 and 2010, the agency warned.

Capitalization and liquidity in banks in Brazil, the region's largest economy, would help protect the impact of a drop in assets and investments, it added.

Latinamerica's economy is predicted to drop 1.9% this year, although positive signs for the year end could result in a 1.5% overall shrinkage, according to the United Nations Economic Commission for Latin America and the Caribbean, Cepal.