How does the downgrade of bank ratings affect customers?

Last week Moody’s announced a downgrade in the ratings of banks BCP, BBVA, Interbank, Scotiabank and Banco de la Nación . Know what this implies.

This month, Moody’s agency lowered the ratings of five banks operating in Peru: Banco de la Nación (BN), Scotiabank Peru, BCP, BBVA Peru and Interbank .

But what does this mean and how could it affect the economy of Peruvians? The professor at Pacífico Business School, Jorge Carrillo Acosta, explained to RPP Noticias .

” To be able to lend, banks ask for money from savers , and they also ask for money from abroad, that is, they ask for loans from foreign banks, or they issue bonds, long-term debt papers. By lowering the rating of these five banks they will be more expensive for the five banks, and in general for the entire system, to collect deposits and then lend them, “he said.

So, what consequences can this decision of the risk rating agency bring to savers and debtors?

How will it affect who has debts?

Carrillo points out that by making the cost of the “raw material” of the banks more expensive, then the cost of loans will become more expensive with an increase in interest rates .

“(This occurs) especially in the long term. These ratings have to do with long-term debts such as  mortgage loans, business loans,” he said.

The expert said that this will apply to new loans that are made, it will not affect the entire portfolio.

“It will not be a very strong issue, it will be progressive. I do not think it is very high, it is not that it will double, but there is a growing trend. Before the second round of elections, mortgage loans were below 5.9% and now they are more or less at 6.10%, the increase is progressive, “he added.

What effect will it have on savers?

On the side of savers, there is a consequence that could be taken as “positive”, since banks could give higher interest on their deposits.

“It is possible that they will pay you a little more for deposits. As it is already very expensive to borrow from abroad, due to the level of risk, suddenly the banks will go out to look for more internal deposits, more local deposits, then they could offer you a better interest rate for term deposits, for the CTS account or the salary account , “he commented.

Currently, according to the SBS , the annual rates of return of savings accounts in soles are between 0.01% and 3.5%. While those of CTS are between 0.25% and 6.9%.