Allen, M.; Rosenberg, C., Keller, C., Setser, B., Roubini, N., 2002, “A Balance Sheet Approach to Financial Crisis”, IMF Working Paper, WP/02/210.
Banco Central De Reserva Del Perú: various editions of the weekly Nota Semanal.
Superintendencia de Banca y Seguros—SBS—Información Financiera de Banca Múltiple, Empresas Financieras y Empresas de Arrendamiento Financiero; al 31 de Diciembre de 2002.
Websites: CAVALI; CONASEV; BVL; and Prolnversión.
International Monetary Fund, 1999, “Financial Sector Crisis and Restructuring-Lessons from Asia”, Occasional Paper 188, Washington D.C.
Goldstein M., and Turner, P., 2003, “Controlling Currency Mismatches in Emerging Economies: An Alternative to the Original Sin Hypothesis.”
Prepared by Christian Keller (PDR).
Despite some downward trend since 2000, Peru has still one of the most dollarized banking systems in Latin America, with 70 percent of the deposits and 75 percent of loans denominated in U.S. dollars.
This follows the approach suggested by Allen (2002). All data for this analysis was provided by the Central Reserve Bank of Peru (BCRP) and the Superintendency of Banks and Insurance (SBS).
Comprising the nonfinancial and financial public sector.
It should be noted that this mismatch is measured taking into account only truly liquid assets. In the simplified matrix presentation, which defines assets as holdings of liabilities, it can be seen that the PFS holds US$5.9 billion short-term foreign-currency liabilities in the form of U.S. dollar loans to the PNFS that fall due over the next year (residual maturity); although these loans theoretically provide the PFS with a dollar cash flow over the short-term, they are not necessarily “liquid” assets.
This assumes that domestic U.S. dollar loans mature on average after only two years. About 20 percent of banks’ loan portfolios are mortgages, 20 percent are commercial credit with maturities beyond one year, and 60 percent are loans with maturities of less than one year. Assuming that the typical maturities in these categories are around 10, 2 and 0.5 years, respectively, the average maturity of the overall loan portfolio is conservatively estimated to be about two years.
As mentioned above, it must be kept in mind that this is true only for the PNFS in aggregate. It might well be that there are sectors or individual entities within the PNFS that have very low foreign-currency liquidity and a maturity mismatch.
Almost two-thirds of Peruvian forward contracts take the form of non-deliverable forwards (NDLs), which only require to settle the difference in the exchange rate value through a payment in local currency. While this avoids the need to deliver the foreign exchange, it implies the same exchange rate exposure in a regular forward contract.
At the same time, it underscores the importance of the government’s steps in recent years toward establishing a market for issuing bonds in local-currency. It will allow over time to better match the currency denomination of its debt with that of its revenue.
In Peru, financial dollarization—the use of the dollar as store of value—is widespread, while real dollarization—the use of dollars as a means of payment—is less prevalent. Most prices and wages are set in local currency. If real dollarization were dominant, it would be theoretically possible that some residents could earn foreign currency through domestic transactions. However, for the country as a whole, foreign currency can only be generated through external transactions.
By end-2002, the PFS held about US$0.9 billion of dollar-denominated financial-system support and debt-exchange bonds (issued during the 1998 bank restructuring), US$0.1 billion of exchange rate-linked central bank CDs and US$0.1 billion of Peruvian Brady bonds. In local currency it held about $0.6 billion of sovereign bonds and US$0.5 billion of central bank CDs.