MEDELLIN May 8 Massive expansion into Central
America is a good business move for Colombian banks, but
financial institutions run the risk that regional instability
could affect markets and the financial system, the head of
Colombia's central bank said on Thursday.
The purchase of Central American entities by Colombian banks
provides diversification to macroeconomic risk, given that the
region is an energy importer, and allows for more exposure to
the United States economy as it continues its recovery, Jose
Dario Uribe said at a conference in Medellin.
But entry into Central America is not without risk for
Colombian financial institutions, Uribe cautioned.
"Some Central American economies present high dollarization
and liquidity risks, as well as limitations in being the lender
of last resort," Uribe told a banking conference.
He added that some countries in the region had a semi-fixed
exchange rate and significant public and foreign deficits.
"You have to take into account these characteristics of
Central American economies," Uribe said.
In recent years Colombian financial institutions have looked
to Central America as the answer to expansionist ambitions, some
because they are reaching the limit of local market expansion.
The three largest Colombian banks, Bancolombia, Banco de
Bogota and Davivienda, as well as Banco de Occidente and GNB
Sudameris, have a presence in Central America.
Regulators and banks should impose high supervision, risk
management and information quality standards in their foreign
branches that at least match those in Colombia, Uribe said.
"This is key for preserving our policy strength," he said.
(Reporting by Nelson Bocanegra, Writing by Julia Symmes Cobb,;
Editing by Clarence Fernandez)