The Peruvian Banking & Financial Sector by RAD

When we consider the most challenging situations Peru has faced in the last two years, without a doubt, we should mention two milestones: Covid-19 and the political instability following the outcome of the presidential elections. 

Concerning the pandemic, a couple of weeks after the first lockdown was ordered by the government and people had adjusted to the new rules of coexistence, the financial market and the main stakeholders in the economy quickly reinitiated their activities and we successfully managed to recover a fair percentage of the country’s economic output.  Nonetheless, the result of the last presidential election generated deep uncertainty among local and foreign investors and, as expected, this uncertainty hit hard an economy that, just like in other countries in the region, was in the road to recovery following the pandemic.  This was clearly in evidence from day one.  In the first month after the presidential election, a “pencils down moment” for a significant number of transactions in the financial sector arrived, as many investors (including sponsors and lenders) quite reasonably concluded that it was safer to suspend all transactions and legal proceedings before local authorities in the financial sector ─ even if such transactions and proceedings were close to closing ─, until there was more clarity regarding the intentions of the incoming government.

Many people who work in the banking and financial sector thought that this uncertainty would be persist, but the reality is that three months after the elections, and due to the fact that there were no changes among the heads and officials of the main financial and economic authorities of the country (Such as the Superintendency of Banking, Insurance and Private Pension Fund Administrators, the Superintendency of Securities Market, and the Peruvian Central Bank) transactions and legal proceedings in the financial sector began in earnest once again, and have gradually been regaining returning to normal levels. 

In addition to the decision to keep the heads of the above institutions in place, the government also decided to respect the 2021 agenda for each institution, which was in our opinion, the right decision as it provided the market with some much-needed stability. 

As evidence of the above, it is worth mentioning that last August, the Superintendency of Banking, Insurance and Private Pension Fund Administrators issued an incorporation authorization to BCI (Banco de Crédito e Inversiones), one of the most important banks in Chile, thus strengthening the confidence of foreign investors in the Peruvian financial system, while promoting the entrance into the market of new competitors that will allow users to have more options and better conditions within the financial system.  Furthermore, the Superintendency of Securities Market has been reviewing several requests for authorization for new fund management companies and it has already approved many of them, such as for Blanco SAF.  Along the same lines, the President of the Peruvian Central Bank has been persistently monitoring the country's monetary policy, preventing a collapse of the financial market.  These are just a few examples of how the main financial authorities of the country have been exercising the responsibilities they had in place both prior to and after the elections.

Additionally, these institutions have made requests for the delegation of legislative powers in order to submit new bills that will facilitate the entry of fresh private investment in Peru.  Accordingly, the Superintendency of Banking, Insurance and Private Pension Fund Administrators has requested powers to, among other things, facilitate the entry into the market of digital banking entities, and change the requirements of effective equity of supervised entities.

Concerning transactions in the banking and financial sector we have seen an increase in the number of corporate financings in various sectors and an increase in transactions in the capital market, such as HIG Capital’s acquisition of a majority stake in Ransa, and the issuance of more than $5 billion in Peruvian sovereign bonds in the foreign market.

In summary, even though many sectors of the economy have been hit by government mismanagement (such as the infrastructure sector, which remains virtually paralyzed), the truth is that the main financial and economic institutions in the country are making huge efforts to keep the ship afloat and, according to recent information from the World Bank, it seems that Q4 2021 results are going to be more positive than we all expected (at least where the financial sector is concerned), despite the negative effects of the recent political uncertainty.  For this reason, and even though it is impossible to predict whether the current government will make any additional changes, it seems that as long as the key figures in the main financial and economic governmental institutions are allowed to continue in their roles and such institutions continue to promote investment in Peru via a clear and stable legal framework, the Peruvian financial and banking sector will be successful in attracting foreign investment and will continue, not without difficulty it must be said, to stand out among other sectors of the economy.

Ana María Sánchez and Valeria Sánchez