Colombia’s chief financial regulator has warned of the fast increase in consumer credit and bad loans, in an interview with La Republica newspaper.
Financial Superindendent Gerardo Hernandez said continued economic growth has given Colombians “a sense of wealth” and led people to spend more than they can afford.
“Consumer credit has remained at very high levels, increasing to over 23%, and non-performing loans have started to climb,” he noted.
“But what worries us is the speed” of that growth, he pressed.
He claimed Colombia’s economic prospects look good in the medium to long term, bolstered by investment from businesses fleeing economic uncertainty in Europe, but warned against expectations of perpetual prosperity.
“There is a large flow of capital into the whole region and that flow always brings the same problems: consumer euphoria, increases in prices of certain basic products,” he told the paper. “We must be very aware, because after comes economic crisis, financial crisis.”
The financial superintendent’s office, the minister of finance and the Central Bank have warned households to spend within their means, “and not think that the positive economic cycle will last forever,” Hernandez said.
In May the minister of finance announced new measures aimed at discouraging banks from taking on high-risk consumer loans. Banks with higher levels of overdue loans now have to pay more into the central bank.
“The point is sustainability,” Hernandez said. The fact that more Colombians have access to credit and financial services, and can afford to purchase TVs and household goods, is not an inherently bad thing. But spending, he said, has to be managed.
From Colombia Reports
