The Association of Private Banks of Uruguay (ABPU) made a series of observations competitiveness and cost of living reduction bill which is being studied by the House of Representativesparticularly on the open finance regime, the regulation of the payment system and the conditions to expand access to credit. Although the union supported the general objectives of the initiative, it warned about the risks of cybersecuritythe costs that will have to be faced by financial institutions and the need to establish greater guarantees for users.
During his appearance before the Finance Commission of Deputiesthe executive director of ABPU, Barbara Mainzerhighlighted that the seven private banks that make up the association contributed more than US$500 million in taxes, fees and contributions during last year. Likewise, he pointed out that four of the 15 companies with the greatest assets invested in Uruguay son banks.
Mainzer maintained that credit constitutes a fundamental tool to promote economic growth. economic growthalthough he warned that its development in Uruguay continues to be “relatively low.” Among the reasons he mentioned the high costs of financial intermediation, the limitations of loanable capital and the lack of information about potential borrowers.
In that sense, he explained that for every $100 of non-financial sector deposits that private banks receive, these institutions lend $149, through the use of equity resources and the issuance of financial instruments.
One of the provisions that the association valued positively was article 19, which enables access to certain information from public organizations, such as the General Tax Directorate (DGI) and the Social Security Bank (BPS)as long as there is consent from the client. Mainzer considered that this tool would simplify the procedures for accessing financing, especially among small and medium-sized companies.
Estefania Leal/El Pais Archive
As an example, he stated that a SME You could enter the platforms of different banks, consult your pre-approved credits and compare conditions without having to repeatedly present the same documentation. In addition, he maintained that having official information would contribute to preventing fraud and over-indebtedness of the homes.
The economist also highlighted the creation of the Single Registry of Attorneys and Representatives. He said that “it will greatly facilitate the interaction of companies,” although he proposed that private banks can consult this information with the authorization of the interested parties. In turn, he maintained that they value “very positively” the provisions that promote electronic notarial action and the replacement of physical corporate books with digital media.
However, one of the main points of concern of the ABPU was the regime of open financeincluded in articles 183 to 203 of the project. This system will allow, under certain conditions and with user authorization, the sharing of financial information between different institutions and service providers.
Mainzer affirmed that the initiative can favor competition, innovation and the development of new products, but warned that its success will depend on how it is implemented. “A single participant with vulnerabilities compromises the entire system,” he said, referring to the increased risks of fraud and cybersecurity that could generate the incorporation of new actors.
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The union proposed establishing greater solvency requirements for the companies participants, clear mechanisms for assigning responsibilities and the creation of two areas of coordination: a governance committee and a risk committee. He also demanded that users have a centralized system to submit complaints, preventing them from having to identify on their own which institution is responsible for an inconvenience.
Another question was linked to the distribution of implementation costs. Mainzer maintained that the necessary investments in technology, infrastructure, security y user service will be “very significant” and that the current design concentrates the economic obligations on the banks, while other participants could benefit without assuming equivalent expenses.
“This configuration could generate a forced cross-subsidy where there are participants who access an essential input at zero cost,” he warned.
For his part, Nicolás Herrera, legal advisor to the Management Committee of Banco Santander, delved into the modifications proposed by the association. He considered it essential that the Central Bank of Uruguay (BCU) have tools to quickly suspend operators who register security incidents and to demand financial guarantees from them in accordance with the risks they incorporate into the system.
Photo: El País Archive
Herrera also warned about the magnitude of the investment required and mentioned that Chile extended the implementation of its open finance regime for one year. “No one imagines that this is something simple. We are talking, initially, of many millions of dollars,” he stated.
In terms of financing, he demanded that the different business actors contribute to financing the infrastructure based on their participation. Likewise, he proposed that the free thresholds provided for in the project could be modified by regulation of the BCUwithout the need to approve a new law.
Another of the issues addressed was article 142, referring to the regulation of exchange rates in transfers. Ignacio Arechavaletapartner and director of Banco Itaú Retail Bankingquestioned the foundations of the proposal, which identify problems of concentration and competition in the payments market.
The executive maintained that the system has experienced a “significant” expansion in recent years, with a reduction in costs for businesses and consumers. According to the data he presented, 80% of transactions are digital. Furthermore, while 90% of the approximately 130 million annual transfers are made at no cost to whoever sends or receives the money.
He also indicated that operations with debit cards y electronic money They represent two-thirds of the market, with an average tariff of less than 1%, and the number of terminals that accept electronic payments doubled compared to 2018.
Debit card. Photo: archive.
Towards the end of the appearance, Mainzer proposed two modifications that, in the opinion of the ABPUcould improve banking competition, although he recognized the political difficulties in advancing its discussion.
The first is to eliminate the prohibition that prevents the public sector from making deposits in private banks, something he considered “an anomaly.” The second aims to modify the priority regime for the withholding of assets and liabilities, which currently places these institutions in an unfavorable position vis-à-vis the Republic Bank and other creditors.
As he explained, this situation affects the cost of consumer credit. While loans in pesos with discount authorization have rates close to 20%, those that do not have this mechanism can reach levels close to 90%, depending on the characteristics of the operation.
Mainzer maintained that greater competition in withholdings would allow rates to be reduced and financing expanded. “This would contribute to the dedollarization“He also stated about the possibility of capturing deposits from the public sector.
Photo: Tami Rausky.
During the exchange with the legislators Questions arose about the protection of personal data. The deputy Juan Martin Rodriguez warned about the risk of moving towards a kind of financial “Big Brother”, particularly due to access to information on payments for public services.
Mainzer responded that the processing of this data will depend on the authorization of each person and defended the existing guarantees in the banking system. “If I have more information and I know that today I have two people, one is a good payer and the other is bad, I cannot differentiate them, I charge them both more,” he exemplified.
Finally, Mainzer reported that the association had sent observations to the Banco Central and to MEF on the open finance articles. Herrera, for his part, delved into three aspects that the union considers priorities: security, governance and cost distribution. In addition, he announced that they would share their proposals with the MEF.
Source: www.elpais.com.uy
