Peru's Superintendency of Banking, Insurance and Private Pension Funds adopts new credit-related foreign exchange risk management regulation effective January 2026

Peru's Superintendency of Banking, Insurance and Private Pension Funds has approved a new regulation on the management of credit-related foreign exchange risk, focusing financial institutions’ risk management on actions to mitigate this risk. The regulation replaces the prior framework from 2005 and is intended to strengthen how supervised entities identify, measure and manage exposures arising when borrowers earn income in Peruvian soles but hold US dollar debt. A key change is the introduction of a standardised methodology to identify exposure to credit-related foreign exchange risk, using debt-in-USD and dollarisation levels for retail portfolios and, for non-retail portfolios, dollarisation levels, financial statement information and a debt coverage ratio. The framework also requires institutions to perform sensitivity analysis covering direct foreign-currency loan portfolios under two local-currency depreciation scenarios of 10% and 20%, assumed migration of exposed borrowers to worse credit grades, and the resulting impact on provisions, regulatory capital and the total capital ratio. In aligning with Basel III, the regulation removes the specific provisioning requirement for this risk while retaining a capital requirement applied to direct and indirect USD-denominated credit exposures to borrowers identified as exposed. The regulation enters into force in January 2026.