Private banks follow state bank's lead and lower rates

Monday, March 18, 2002

Some Chilean private banks have followed state bank Bancoestado's lead by lowering their lending rates on some mortgage and consumer products, local press reported.

Bancoestado was the first bank that responded to the Chilean Central Bank's interest rate cut last week. The state bank brought down its mortgage rate to a historical low of 5.8%.

The private banks tardiness in responding to the Central Bank's rate cuts (three this year) have provoked a storm of accusations that the banking sector is not seeking to help to reactivate the economy. Both President Ricardo Lagos and finance minister Nicolas Eyzaguirre lashed out against the banks last week demanding them to lower interest rates.

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BBVA Banco Bhif (NYSE: BB) lowered its mortgage rates through the re-launch of its mortgage product Hipotecon and Bci and Corpbanca lowered their rates on consumer loans.

Bci's individual banking manager Abraham Romero said that the bank had always transferred the Central Bank's rate cuts to its clients but the bank has not made a big deal of those rate cuts in terms of publicity. However, this time "we were interested in making it known because we want to make it clear that we are transferring the benefit of the Central Bank [to the clients]."