June 16, 2018 / 12:48 AM / 10 months ago

UPDATE 1-Nicaragua cenbank acts to bolster financial system amid political crisis

(Adds no further comment from central bank, adds background)

By Alonso Soto

MANAGUA, June 15 (Reuters) - Nicaragua’s central bank on Friday said it would lower reserve requirements for banks in an attempt to increase liquidity in the financial system, which has seen a sharp drop in deposits after two months of violent anti-government protests.

In a statement, the Central Bank of Nicaragua said the reserve requirement ratio for banks would be reduced from 12 percent to 10 percent, effective June 18.

The bank said the measure was aimed at promoting the stability and performance of the financial system and facilitating banks’ liquidity management.

Since late March, Nicaraguan banks’ dollar deposits have dropped nearly 11 percent, or $441 million, to $3.6 billion, according to central bank data.

“The measure seeks to help banks meet the demand of clients who are withdrawing their deposits,” said Adolfo Acevedo, an independent economist based in Managua. “People are withdrawing their deposits amid all this uncertainty. People prefer to keep their money in hand.”

The central bank did not respond to a request for further comments on the measure.

Renewed talks between the government and civil groups to end two months of protests that have left 170 dead hit a snag on Friday after authorities rejected calls for an international probe into the violence.

The vast majority of those dead have been protesters who accuse President Daniel Ortega of turning increasingly authoritarian, according to the Nicaragua Center for Human Rights, which has monitored the violence.

The eight weeks of violent demonstrations have ground the economy of the poor Central American nation to a halt, costing it around $650 million, or about 4 percent, of the country’s gross domestic product, according to an economist’s estimate cited by the government.

Standard & Poor’s on June 8 revised Nicaragua’s outlook to negative from stable, warning that the crisis would hurt the country’s economic performance this year and next. (Reporting by Alonso Soto Editing by James Dalgleish and Leslie Adler)

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