The Bank for International Settlements has published a working paper assessing Colombia's January 2023 increase in provisioning requirements for long-term consumer loans. The paper finds that the measure raised banks' provision coverage ratios, strengthening resilience to potential credit losses, but did not materially change average credit supply conditions for affected loans. Across the market as a whole, new loan amounts, interest rates and collateral requirements remained broadly unchanged after the reform. The study examines new consumer loans in 2022-2024 using granular supervisory data and compares loans around the policy thresholds. The Colombian reform required additional provisioning for new consumer loans with maturities above 72 months and 108 months, increasing expected-loss provisions by 10% and 40% respectively, while excluding credit cards, revolving credit and pensioner payroll loans. The effect on coverage ratios was stronger for loans above 108 months, consistent with the larger calibration. The average results, however, masked heterogeneity across lenders. Smaller institutions tightened credit for loans above 108 months by reducing loan amounts and lowering loan-to-value ratios, while larger institutions absorbed the higher provisioning cost without changing lending terms.
Bank for International Settlements2026-07-09
Bank for International Settlements working paper finds Colombia long term consumer loan provisioning reform raised buffers with limited effect on credit terms
A Bank for International Settlements working paper finds that Colombia's January 2023 provisioning changes for long-term consumer loans increased banks' loss-absorption buffers without materially changing average loan amounts, pricing or collateral terms. The rules added 10% provisions for new loans above 72 months and 40% above 108 months, with tightening concentrated in smaller lenders for the longest maturities.