the Central bank announced the establishment of Investment Securities, which is trying to compete with depositors who have more than ten thousand dollars in the financial system, a situation that the bank will not strengthen, will lead to a reduction in liquidity and it would become competition for them, Because they are aimed at their audience, they have warned representatives of the private sector yesterday.
The announcement of this investment tool from the NCB comes at a time when the financial system is hit by the exit of more than $ 700 million from deposits since April 18.
You see: according to the Central Bank of Nicaragua, the crisis brings more than three billion córdoba's out of circulation
The BCN stated that with this financial instrument it intends to restore the confidence of the savers and the 700 million withdrawn, without explaining how these titles benefit the banks.
"A depositor who collects money from a private bank can deposit it in the bank Central bank if it is what you want through the investment effects ", yesterday Ovidio Reyes, president of the Central Bank of Nicaragua (BCN), announced during a press conference to which LA PRENSA was not invited.
Rates higher than banking
In order to attract depositors, the central bank offers higher interest rates than the national bank. They can acquire these titles, according to Reyes, non-banking natural and legal persons.
The BCN instrument works in the same way as the certificates of deposit offered by the bank, namely one, three, six, nine and twelve months. The novelty is that the maximum bank issuer in the country will pay twice the maximum applicable rate on the market, which was 4 percent before the start of the crisis, depending on the type of certificate.
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The new securities offered by the BCN, which will be paid in córdobas with retention of value, receive rates between 4.5 and 8 percent. These effects can be obtained directly from the BCN or from the various stock market positions, Reyes said, and said that this will help restore confidence in the national financial system.
The interest to be paid
The rates are paid as follows: "On a month 4.5 percent, for investments on three months 4.75 percent, investments on six months 7 percent, investments on nine months 7.5 percent and investments on twelve months 8 percent", detailed Reyes.
Also read: Consumption falls as another victim of the crisis in Nicaragua
The opinion of the private sector is, however, different. "They start from the premise that by increasing the rate, the people who take money (from banks) will leave, but the detail is that what it will do is to remove the liquidity of the financial system," said a representative from the sector who asked not to be quoted.
"Two things will happen: either people take the money away from the banks and go with them (to the BCN) or the banks will have to match the rates they offer to prevent customers from taking the money," he said. . Source, who believes that in the current circumstances in which the bank has problems with default and retention, the rates can barely double and that credit would make more expensive, which in turn would affect consumption and investment.
"The higher rate implicitly includes a risk premium because, in a context of general mistrust, you offer to pay higher interest rates to prevent the currency from leaving the country, which could cause an upward movement in the interest rates of the financial system, which his turn increases the interest rate on loans, which has a negative effect on consumption and investment, "said Juan Sebastián Chamorro, director executive director of the Nicaraguan Foundation for Economic and Social Development (Funides).
Will you finance your reserves?
The announcement by the BCN, which is described by the private sector as "a desperate measure", is also seen as an option to finance the fall of reserves with public funds.
"The main gain is not the financial stability of the banks, because this could be an incentive to withdraw money from commercial banks and transfer them to these BCN instruments.The monetary authority is really looking forward to the position of the To keep international reserves solid and try to discourage the departure of more currencies, because placing these titles, the BCN guarantees that resources remain in the country, "he explained.
Chamorro, who doubts whether they have sufficient public confidence, although in theory the securities issued by the institutions of a state pose no risk and that "the BCN has been very responsible in managing the monetary policy of the country."
"In a context where there is suspicion in all government institutions and even when the BCN is the public institution with the greatest credibility, it is currently difficult to think that economic agents want to deposit their funds in that institution through these titles. though the rate is very attractive, "said Chamorro.
Although the BCN says that other countries, including Costa Rica, also offer these instruments, the consulted parties believe that the context is different here.