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S&P Global: Colombian crackdown on unregulated payroll lenders should not affect banks

TheColombian government's recent crackdown on unregulated deductible-payrolllenders amid an investigation into lending practices should not spill over toregulated, domestic banks, S&P Global Ratings said in an Oct. 4 report.

Colombia'sfinancial authorities recently shut down six unregulated payroll lenders andlaunched a probe to look into the lending practices of peers. The report saidbanks aren't at risk as Colombian commercial banks have well-developed businessmodels for payroll lending and prudent underwriting practices.

"Webelieve that the rising share of payroll-deductible loans as a percentage oftotal consumer lending will temper the risk of Colombia's cooling economy fordomestic banks," S&P Global Ratings said.

Thecountry's economic slowdown, amid high inflation and the peso's depreciationpose risks to banks' asset quality metrics, the rating agency said.

However,S&P Global Ratings does not expect rising unemployment in the oil and gassector to represent a significant threat to asset quality metrics in thepayroll lending segment.

Payrollloans represented 37% of total consumer loans in Colombia as of June 30, higherthan in Brazil and Mexico.

S&P Global Ratingsand S&P Global Market Intelligence are owned by S&P Global Inc.