Survey: Puerto Rico gov’t needs to work closer with banking sector to boost growth
Puerto Rico’s banking sector, which is likely the most impactful sector of the economy, could use greater collaboration from the government to boost individual and commercial services, while reducing expenses for the public sector.
Furthermore, the government could also move quicker toward stimulating the use of local banks to manage its liquidity and urge the island’s unbanked sector to open accounts to foster growth.
Such were some of the suggestions from the sector included in “The socioeconomic contribution of the banking sector in Puerto Rico” study unveiled by the Puerto Rico Bankers Association.
In it, the sector also stressed the need for the digitization of public transactions for quick access to data and called on the government to avoid over-regulation of the industry and to improve the data collected by the Office of the Commissioner of Financial Institutions by expanding the database to include the most recent information.
Puerto Rico Bankers Association Executive Vice President Zoimé Álvarez-Rubio said if the government promotes that middle- and low-income families formalize accounts with banks and other financial institutions it could speed up sending critical funds to households, such as unemployment benefits and local and federal stimulus payments.
“Based on a study performed by Gaither International, approximately 65% of the Puerto Rico population has a bank account. That is a high number compared to other Latin American countries and jurisdictions, but it is low compared to the United States, where financial inclusion is approximately 94%,” the study confirmed.
The study also concluded that Puerto Rico’s banking sector “is in a solid financial and capital position, that it is the main economic contributor to all the sectors that make up the local financial industry, and that it has a solid record of contributing to the well-being of Puerto Rico.”
“For the banking industry it’s important to be able to validate its role, contribution and impact on the island,” said Álvarez-Rubio.
“Commercial banking plays an essential role in modern economies, and in our case, in different areas of the socioeconomic well-being of Puerto Rico such as: the creation of direct and indirect jobs, purchase of local products and services, services to the government sector and management community, among others,” she said.
“We have identified the need for up-to-date data as an industry, which includes a complete analysis of banking performance. This, to continue serving Puerto Rico in an effective and efficient manner,” she added.
The study commissioned to V2A Consulting Puerto Rico, discussed the transformation that commercial banking has undergone in Puerto Rico during the past 25 years, specifically the reduction of the sector from 21 commercial banks registered in 1995, to six currently in operation — Banco Popular, FirstBank, Oriental Bank, Citi, Banesco and the Cooperative Bank.
The island’s banking sector handles some 5.2 million deposit accounts for individuals, businesses and the public sector. In 2019, commercial banks facilitated approximately 117,000 consumer loans and lines of credit, 7,800 home loans and 8,900 loans to small, medium and large businesses, for a total of $6.1 billion in originated loan balances, the study confirmed.
Commercial banks generate 13,500 jobs, representing 44% of the total payroll within Puerto Rico’ financial and insurance industries. Commercial banks also generate significant revenue for the Treasury Department, paying about $100.5 million to the public coffers in 2019.