Effects Of The Crisis and The Credit Delinquencies: Why Interest rates rise?
Peruvian banking has not suffered by the financial crisis, nowhere near what has been banking in the U.S. or in European Union countries, where the majority of larger entities, and supposedly more solid, had to be progressively rescued by the public sector. This government intervention was necessary due to the inability of the private sector, owner of these entities to provide the highest capital which was needed to tackle the most progressive deterioration of its portfolio, although in many cases can not rule out its "natural" aversion risk.
In such circumstances of crisis, the credit stops expanding and, of course, also increase loan delinquency rates. In this scenario, what would be expected to make credit institutions with the interest rates they charge their customers for their new credit? Is it as simplistic reasoning should upload some? To outline a more responsible about what happens or should happen, should review what happened with the banks in other countries most affected by the crisis.
For example, thanks to his now well-recognized system of supervision, the Spanish banking sector was the best endured the gradual spread of the subprime crisis originated in U.S. in mid-2007 and worsened in the second half of 2008 did not have Rescue use applications or their government or central bank as if they had to do numerous banks and non-bank in the U.S., UK and other European Union countries. However, this did not prevent the credit ceases to expand and increase their level of delinquency.
When the crisis erupted in August 2007, the Spanish credit delinquency rate, measured by the proportion of bad loans in the credit system, was around 0.84%, a level where it had hovered since mid 2004 . However, in August 2008 and late payments had increased to 2.53% (+169 bp) and when the crisis was exacerbated by increasing delinquencies continued: in August 2009 to 4.94% (+241 bp) and in February 2010 5.39% (+45 bp). And of course, until mid-2007 the balance of the loans grew at annual rates exceeding +20%, but after the start of the credit slowdown and grew in mid-2008 at lower rates of +10% annually. In fact, in mid-2009 the growth was almost zero in March 2010 and even became negative.
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Economics and natural disasters
The recent destruction product of natural disasters that have taken place in Chile and Haiti offers a powerful contrast to the economic analysis. Moreover in highly heated moments where the drama continues. Today Monday, women's day, there was an earthquake measuring 6.0 in Turkey, on Friday, one grade 6.5 in Indonesia and on Thursday another 6.2 in Taiwan. Earthquakes will not cease.
Haiti was hit in January with an earthquake measuring 7.3 on the Richter scale (equivalent to a nuclear bomb) that devastated. Chile with an earthquake measuring 8.8 in the same scale which also caused extensive damage. Because the Richter scale is a base 10 logarithmic scale, the amplitude of the earthquake in Chile was nearly 100 times larger than the earthquake in Haiti (100 nuclear bombs), but the damage to its infrastructure, although substantial, were lower . In Haiti, killing about 230,000 people, in Chile, the dead, to this day, reaching 497, more victims of the tsunami that followed the earthquake, the earthquake itself. Understanding human catastrophes that are painful and that it is not a comparison, a catastrophe reveals the strength or weakness of State institutions. This is a task in which the inhabitants of a country must agree in order to determine how to prevent future disasters.
In this sense, the scientific literature provides us with important elements on the effects of short-and long-term natural disasters, and its strong social impact. At the outset, we must recognize that these disasters are regressive and that most affect the poorest people and, by extension, to the poorest countries. A recent study found 200 natural disasters and identified three variables that reduce vulnerability to disasters: the losses are lower in countries with more education, stronger financial markets and economies more integrated to the world. But the central and most important element is the ability of countries to generate savings, and transparency and seriousness of their legal and financial systems.
Preliminary estimates calculate the impact of losses in infrastructure, bridges, roads, hospitals, schools and homes destroyed in Chile at around 10,000 million dollars, but it is too soon to say. Whatever the amount, the important thing is that Chile has the resources to rebuild the damaged. The Chilean Constitution allows the use of up to 2% of their budgets in case of disaster. In addition, the Fund for Economic and Social Stabilization reached 11,000 billion at December 2009 (7% of GDP).