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V.I. Banks Keep Making Loans Despite Recession

Feb. 2, 2009 — Though national and international capital markets are a mess and the network news gives nightly accounts of banks not lending money after getting bailed out by Washington, V.I. banks continue to lend.
Banco Popular and First Bank, two local banks with headquarters in Puerto Rico, are among the many nationwide receiving federal bailout money. Banco Popular's parent corporation, Popular Inc., secured $935 million Dec. 5. First BanCorp, parent of First Bank, got $400 million Jan. 16, according to the U.S. Treasury.
First Bank continues to lend, but the economic slowdown is indirectly reducing the number of loans, according to Cassan Pancham, executive vice president of First Bank.
"We have never stopped lending," Pancham said. "As the economy gets bad and people's circumstances change, there are less credit-worthy individuals applying. But with that caveat, we lent even more in 2008 than we did in 2007. But we have noticed demand has fallen off … and that is a natural response to what has been happening."
Scotia Bank is lending, too, said Lawrence Aqui, vice president and country manager for the bank. As a Canadian bank, it has received no U.S. federal bailout funds, Aqui said. Scotia Bank doesn't need any financial relief either, he said.
"Being a Canadian bank, we are not in any way in the same situation," he said. "We have a much stronger financial position."
The structure of Canada's banking and regulatory systems explains the difference, he said.
"Banks are localized in the States," he said. "Canadian banks are centralized right across the nation. And we are more diversified because of our international operations. Capital requirements are higher for banks in Canada, and most Canadian banks are well above their requirements."
But much of lending is the art of assigning a monetary value to risk to make a prudent and profitable investment. So the economy affects lending from well-capitalized banks, too. Aqui explained the effect the economic downturn has had on Scotia Bank lending.
"Loan down payments may be a little more, maybe two or three percent higher," he said. "But we're still granting loans."
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