New capitalization of BancoEstado to meet Basel III requirements

The Ministry of Finance announced in April 2021 the submission of a bill authorizing a new capitalization for BancoEstado for up to US$1,500 million.

The capital increase may be carried out until December 31, 2025 and is intended to enable the state-owned financial institution to comply with capital requirements in accordance with Basel III standards.

This is a very well-founded bill, which responds to the work of many people so that BancoEstado can adequately comply with Basel III requirements in the long term, and "this bill will also reinforce BancoEstado's important social role, which has been reflected during the pandemic, which is to support all the inhabitants of the country".

The initiative includes a legal adjustment to allow BancoEstado to issue "perpetual bonds" under the same conditions as other banks in the industry. This constitutes an additional source of financing to comply with the capital required by the regulator, as established by Basel III.

In addition, the project seeks to reduce the capital deductions that the regulator must make to BancoEstado due to deferred tax assets.

Finally, the bank will have to report annually to the House and Senate Finance Committee on the evolution of its capital.