Monday, January 26, 2009

Bank of Guatemala Extends Liquidity

The JM, Junta Monetaria (Monetary Board) last Wednesday approved an extension or widening of the window of liquidity (money supply) in U.S. dollars to the national banking system until next May 31 to a maximum of US $290 million. The previous measure expires on January 31, 2009.

By the end of last year, the Bank of Guatemala (Banguat) had offered US $258 million but allocated only US $ 93.7 million. The option of widening the window to provide liquidity in U.S. dollars resulted from the decision of the correspondent banks to cut or reduce credit lines to local banks. The need for money led to the Bankers Association of Guatemala to apply the measure.

Luis Lara, representative of the banking sector before the Monetary Board and CEO of Banco Industrial believes that such a provision is positive but felt that constant vigilance is needed until the international banking situation is normalized. At present, the reduction in credit lines from international banks could be around U.S. $300 million. Another analyst said that it's good to have this as a preventative measure. Right now one must maintain the stability of the banking system, as it has not been touched by the international crisis. The measure gives banks the option to negotiate extensions of credit lines. According to data from the central bank, as of December 31st the banks in the system had received Q3,944,000,000 of liquidity in domestic currency.

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