Colombian central bankers warn on stability risks

Colombian policy makers are monitoring credit indicators to ensure that the lowest interest rate in Latin America doesn’t lead to excess risk-taking that could jeopardize the stability of the financial system, central bank board members said yesterday.

The central bank will study the quality of household credit, and the amount of debt that consumers are taking on, when it decides on the future direction of interest rates, bank co-director César Vallejo said.

“Credit risk would be generated if interest rates are excessively low, or if low interest rates induce debtors to take on more debt than they can handle, or creditors in the financial system fall into the temptation of offering more credit,” Vallejo said.

Source: Bloomberg