1. The Peruvian financial system has a very positive stability outlook due to strict regulatory standards. Banking institutions represent 89% of total financial system assets of $85 billion. Regulations have implemented Basel II and III standards. 2. Key banking indicators show the system is well capitalized and provisioned. Banks hold capital and provisions 36-33% above minimum requirements. Profitability remains high. 3. Peru has opportunities for financial growth in retail banking, microfinance, and infrastructure to support continued 15% annual growth in financial system assets.

1. Peruvian Financial System:
Liquidity & Solvency to sustain growth
Javier Poggi
Chief Economist,
Superintendence of Banks, Insurance Companies and
Pension Funds Administrators (SBS)

2. Agenda
1. Very positive financial stability outlook
within a strict regulatory framework
2. Good prospects for growth and
business opportunities

3. 1. Very positive financial stability outlook
within a strict regulatory framework

4. Banking institutions represent almost 90%
of total assets of the Financial System
(US$ 85 billion in assets)
Assets as of 29 February 2012
Number of
institutions
Assets
(US$ Million)
Size
(%)
Banking Institutions 15 75 447 89,0
Finance Companies 10 3 149 3,7
Microfinance Institutions 34 6 205 7,3
Municipal Non-Banking Institutions 13 4 711 5,6
Rural Non-Banking Institutions 11 1 024 1,2
Micro & Small Enterprise Development Entities 10 470 0,6
FINANCIAL SYSTEM 59 84 801 100

5. Financial System Regulatory Environment
Same regulatory framework for all
supervised institutions
Balance between qualitative risk
management requirements and basic rules
(provisions, capital, liquidity ratios, etc)

6. Financial System Regulatory Environment
Basel II fully implemented and adapted to local
conditions:
Parameters recalibrated to reflect local risk
environment (i.e. stricter)
Addressed relevant local risks:
Foreign exchange induced credit risk
Over indebtedness

7. Financial System Regulatory Environment
Significant implementation of Basel III framework:
Countercyclical capital requirements (also
countercyclical provisioning)
Capital surcharges for systemic institutions
Additional buffer (Peruvian version of
conservation buffer: Interest rate risk for
banking book and individual, sectoral and
geographic credit risk concentration)
Liquidity standards  Under public consultation

8. Some Banking System Indicators

9. Banking System: Liquid assets / short - term liabilities
(%)
0
8
16
24
32
40
48
56
64
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Domestic Currency Foreign Currency
Minimum Ratio (Foreign currency)
Minimum Ratio (Domestic currency)
Liquidity of the Banking System largely
exceeds the minimum requirement
43,1
47,8

10. Banking System shows good quality of assets:
1.6% of non performing loans
Banking System: Loan quality indicators
(as a percentage of total loans)
0,0
0,5
1,0
1,5
2,0
2,5
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Past - due loans Refinanced and restructured loans

11. Banking System holds a 36% buffer on top of
required loan provisions
Banking System: Coverage Indicators
(%)
100
130
160
190
220
250
280
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Provisions / Past-due loans
Provisions / Past-due, refinanced and restructured loans
Banking System: Provisions
(US$ Million)
901
1 123
1 349 1 409
266
128
184
239
247
183
202
264
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Aug-2009 Dec-2010 Dec-2011 Feb-2012
Required provisions Cyclical provisions Voluntary provisions

12. Banking System: Capital ratio
(%)
7
8
9
10
11
12
13
14
15
16
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Banking
Law
International Standard
Banking System holds 33% of capital buffer
13,52
10,0
8,0
Banking System: Capital
(US$ Million)
3 427
4 254
5 476 5 521
1 432
1 662
1 849 1 942
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
Dec-2009 Dec-2010 Dec-2011 Feb-2012
Regulatory capital Capital buffer
Tier 1 Capital: 78% of regulatory capital

13. Large buffers of loan provisions and capital
would allow banks to remain solvent under a
stressed adverse scenario
Variables
Stress
scenario
GDP Peru (YoY %) 0,50
Inflation (%) 4,52
Unemployment (%) 11,50
Copper price (US$/lb) 125,00
Fishmeal Price (US$/MT) 800,00
Exchange rate (PEN/US$) 2,72
EMBIG Latin America (bps) 650,00
GDP China (YoY %) 5,50
GDP US (YoY %) -1,00
Banking System
Minimum
regulatory capital
requirement
0
2
4
6
8
10
12
14
Banking System
13,5%
11,7%
Current capital ratio
Capital ratio after stress

14. Profitability of the Banking System remains high
Banking System: Annualized ROE and ROA
(%)
24,29
2,35 2,34
24,59
0
5
10
15
20
25
30
35
ROE ROA
Feb-2011
Feb-2012

15. 2. Good outlook for growth and
business opportunities

16. Retail banking will continue to grow,
creating business opportunities
 During the last
decade, retail
loans have
increased, on
average, 20%
annually
 Mortgage loans
represent less
than 4% of GDP
3 150
3 508
4 023 4 244
4 598
5 015
18,3
20,1
22,7
23,6
25,1
27,0
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
N°debtors (in thousands) N°debtors / Adults (%)

17. Peru is the world leader in Microfinance,
being regarded as the best microfinance business
environment according to The Economist
 It is estimated that
only 40% of micro
entrepreneurs are
funded by the
Financial System394
459 508
610
745
898
1 093
1 190
1 355
1 510
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Financial System: Numberof Micro Enterprise Debtors
(In thousands)

18. Large infrastructure deficit in the country opens
interesting opportunities for both investment and
provision of financial services
Main sectors
Transport (roads, railroads, airports, ports)
Energy
Telecom
Water
Agriculture
Tourism

19. We expect the Financial System will continue
growing around 15% per year
-10,0
-5,0
-
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Loans of Financial System
(Annual Growth %)

20. Thanks
For detailed information about the
Peruvian Financial System
Visit
WWW.SBS.GOB.PE