Internationally renowned credit ratings agency Moody’s is predicting that credit conditions in Latin America will return to normal this year.

This assessment has been predicated on the growing rate of vaccination across the region and the fact that steady economic growth is stabilising banks, making them resilient to potential risks arising from inflationary pressures and weak job markets.

Moody’s reports that, “recurring earnings generation, high reserves, and strong capital injection offset the potential for rising asset risks at Latin American banks”.

In its report, Moody’s observed that more and more Latin Americans are getting vaccinated, with the rate of inoculation reaching above 60 per cent in most countries.

The successful vaccination programme creates a positive operating environment, enabling businesses to expand and add more employees to their workforce.

The existing environment supports the growth of fintech companies and e-commerce services providers, thanks largely to the region’s young population and low financial inclusion.

According to Moody’s, although the new fintech firms create a kind of anxiety among the traditional bankers, the general public will stand to gain in the long run.

However, Rodrigo Marimón, a Moody’s analyst, is warning that smaller-niche banks may find themselves in trouble if they don’t diversify and remain exposed to weaker borrowers.