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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

April 6, 2023

Will Latin America See Contagion From Bank Failures?

The collapse of U.S.-based Signature Bank was at the center of a crisis among some financial institutions that erupted in March. A Signature Bank branch in New York is pictured. // File Photo: SWinxy via Creative Commons.

Q

  • Bank of Mexico Governor Victoria Rodríguez said on March 17 that she saw no contagion in the country following the collapse of U.S. lenders Silicon Valley Bank and Signature Bank and from market turmoil that dealt a powerful blow to Credit Suisse. What effects could the banking industry tumult have for lenders in Latin America and the Caribbean? To what extent do banks in the region face conditions similar to those that imperiled the U.S. and Swiss lenders? What should banks and governments in Latin America do to guard against similar crises?

A

Theresa Paiz-Fredel, senior director and head of credit research for Latin American banks at Fitch Ratings: “Fitch Ratings expects direct fallout, contagion risks and second-order effects from the global banking industry tumult to be limited for banks domiciled in Latin America and the Caribbean. This reflects limited, if any, direct exposure to troubled banks, structural factors, including meaningful levels of stable retail deposits, and the shorter duration of securities portfolios. Given the region’s history of inflation, central banks, led by Brazil, began tightening monetary policy well before developed markets, with the region’s largest central banks raising policy rates by…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe, click here. For terms and conditions, click here. For more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.
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Diego Arria
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Merike Blofield
Professor of Political Science,
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Devry Boughner Vorwerk
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Joyce Chang
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J.P. Morgan

Marlene Fernández
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Peter Hakim
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Jon E. Huenemann
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James R. Jones
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Barbara Kotschwar
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John Maisto
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Nicolas Mariscal
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Thomas F. McLarty III
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Beatrice Rangel
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Ernesto Revilla
Head of Latin American Economics, Citi

Gustavo Roosen
President,
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Andrés Rozental
President, Rozental &
Asociados

Shelly Shetty
Managing Director,
Sovereigns, Fitch

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