World Bank2012-03-192012-03-192010-11-01https://hdl.handle.net/10986/2949Despite the global and domestic shocks of 2008-2009, the banking sector remains sound. Salvadoran banks were not directly exposed to the global financial crisis. However, the parent banks of several major Salvadoran banks were and directed subsidiaries to conserve risk capital. The higher risk aversion and recession in the United States, combined with uncertainty about the 2009 elections, led to a sharp economic downturn, and a decline in both credit demand and supply. Banks' nonperforming loans increased and profitability declined. Even so, capitalization remained high. Stress tests indicate that most banks would be able to withstand large deposit withdraws and severe deterioration in credit quality arising from large macroeconomic or sectoral shocks. However, credit concentration risks appear significant. Regulated non-bank financial institutions do not pose significant risks, but pension funds' poor profitability is a concern for the long-term. Regulated cooperative banks and insurance companies report healthy financial indicators. Brokerage houses have reduced drastically their fund management activities, which until recently posed systemic risks due to inadequate regulations and unsound commercial practices. Pension funds have grown considerably and now amount to 25 percent of total financial sector assets. However, investments are mostly in low-yielding public sector securities. To ensure a sound financial footing for the pension system, an in-depth actuarial analysis should evaluate pension reform costs and calculate replacement rates. The type of investments available to pension funds should be expanded progressively to increase diversification, improve returns and foster capital markets.CC BY 3.0 IGOAGRICULTURAL LOANSARBITRAGEASSET CLASSIFICATIONASSET QUALITYASSET RATIOBALANCE SHEETBANK ASSETSBANK CREDITBANK DEPOSITBANK DEPOSITSBANK LIQUIDITYBANK PROFITABILITYBANKING CRISISBANKING LAWBANKING REGULATIONSBANKING SECTORBASIS POINTSBONDSBROKERAGEBROKERAGE HOUSESBROKERSCAPACITY CONSTRAINTSCAPITAL ADEQUACYCAPITAL FLOWSCAPITAL MARKETCAPITAL MARKETSCAPITAL MARKETS DEVELOPMENTCAPITALIZATIONCENTRAL BANKCENTRAL BANKSCOLLATERALCOLLATERAL POLICYCOLLECTIVE INVESTMENTCOMMERCIAL BANKSCOMPULSORY INVESTMENTCONSUMER CREDITCONSUMER PROTECTIONCONTINGENT LIABILITYCOOPERATIVE BANKSCORPORATE BONDCORPORATE BOND ISSUERSCORPORATE GOVERNANCECORPORATE INSOLVENCYCREDIT AVAILABILITYCREDIT BUREAUSCREDIT GUARANTEECREDIT INFORMATIONCREDIT INFORMATION SYSTEMSCREDIT LINESCREDIT QUALITYCREDIT RATINGCREDIT RATING AGENCIESCREDIT REPORTINGCREDIT REPORTING SYSTEMSCREDIT RISKCREDITORCREDITOR BANKSCURRENCYDEBTORDEBTORSDEFAULTSDEPOSIT INSURANCEDEPOSIT SERVICESDEPOSITSDERIVATIVESDEVELOPMENT BANKDOMESTIC LIQUIDITYDOMESTIC SECURITIESDOMESTIC STOCK EXCHANGEECONOMIC POLICIESEUROBONDEXTERNAL BORROWINGFACE VALUEFINANCIAL ASSETSFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL INFORMATIONFINANCIAL INFRASTRUCTUREFINANCIAL INSTABILITYFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL SECTOR DEVELOPMENTFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL DEFICITFIXED INCOMEFIXED INCOME SECURITIESFOREIGN INSTRUMENTSFUND MANAGEMENTFUND MANAGERSGOVERNANCE STANDARDSGOVERNMENT SECURITIESGROSS DOMESTIC PRODUCTGROSS SETTLEMENT SYSTEMGUARANTEE FUNDINFORMATION TECHNOLOGYINSTITUTIONAL INVESTORSINSURANCE COMPANIESINSURANCE INDUSTRYINSURANCE PENETRATIONINTANGIBLEINTANGIBLE ASSETSINTEREST RATEINTEREST RATE RISKINTERNATIONAL MARKETSINTERNATIONAL STANDARDSINVESTINGINVESTMENT FUNDSINVESTMENT OPPORTUNITIESINVESTMENT POLICIESISSUANCELEGAL FRAMEWORKLEGAL PROTECTIONLEGAL PROVISIONSLEGAL REFORMLENDING INTEREST RATESLETTERS OF CREDITLIQUID ASSETLIQUID ASSETSLIQUIDITYLIQUIDITY RISKLIQUIDITY RISKSLOAN PORTFOLIOLOANS FROM BANKSLOCAL STOCK EXCHANGEMACROECONOMIC STABILITYMANDATORY PENSION FUNDSMARKET ACCESSMARKET CONDITIONSMARKET DEVELOPMENTMARKET DISTORTIONSMARKET INSTRUMENTSMARKET RISKMARKET SIZEMARKET SURVEILLANCEMICROENTERPRISESMICROFINANCEMONETARY FUNDMORTGAGEMORTGAGESMUTUAL FUNDMUTUAL FUND INDUSTRYMUTUAL FUNDSNON-PERFORMING LOANNON-PERFORMING LOANSNONPERFORMING LOANSNPLOPERATIONAL INDEPENDENCEOUTSTANDING DEBTOUTSTANDING GOVERNMENT SECURITIESOVERHEAD COSTSPAYMENT SYSTEMPAYMENT SYSTEMSPENSIONPENSION FUNDPENSION FUNDSPENSION REFORMPENSION SYSTEMPENSIONSPOLITICAL UNCERTAINTYPRIVATE CAPITALPROVISIONING RULESPRUDENTIAL REGULATIONPRUDENTIAL SUPERVISIONPUBLIC BANKSPUBLIC DEBTPUBLIC DEBT SECURITIESPUBLIC FUNDSPUBLIC SECTOR DEBTREGULATORY FRAMEWORKREMITTANCEREMITTANCESREPOSRESERVERESERVE FUNDRESERVESRETURNRETURN ON ASSETSRETURNSRISK ASSESSMENTSRISK AVERSIONRISK CAPITALRISK MANAGEMENTRISK PROFILESSAFETY NETSAFETY NETSSECURITIESSECURITIES MARKETSSECURITY MARKETSSEIZURESEIZURESSETTLEMENTSETTLEMENT SYSTEMSSHAREHOLDERSSOLVENCYSOVEREIGN RATINGSTOCK EXCHANGESTOCK MARKETSTOCK MARKET CAPITALIZATIONSTOCKSSUPERVISION MECHANISMSSUPERVISORY AGENCYSUPERVISORY AUTHORITIESSUPERVISORY AUTHORITYSUPERVISORY POWERSTAXTAX COLLECTIONSTERRORISMTRADINGTRANCHETRANSACTIONTRANSACTION COSTSTREASURYTREATYTRUST FUNDUNDERLYING ASSETUNDERLYING ASSETSVALUATIONVALUATION OF PORTFOLIOSVALUATIONSWITHDRAWALYIELD CURVEWorld Bank10.1596/2949