MEDELLIN, (Reuters) – Massive expansion into Central America is a good business move for Colombian banks, but financial institutions run the risk that regional instability could affect markets and the financial system, the head of Colombia’s central bank said on Thursday.
The purchase of Central American entities by Colombian banks provides diversification to macroeconomic risk, given that the region is an energy importer, and allows for more exposure to the United States economy as it continues its recovery, Jose Dario Uribe said at a conference in Medellin.
But entry into Central America is not without risk for Colombian financial institutions, Uribe cautioned.
“Some Central American economies present high dollarization and liquidity risks, as well as limitations in being the lender of last resort,” Uribe told a banking conference.
