Peru's Central Bank to extend reserve requirement on foreign currency loans

The Central Reserve Bank of Peru (BCRP) has announced an extension of its additional reserve requirement for foreign currency loans, a move designed to curb the country's high level of dollarization in its credit system. This policy, set to take effect in December, will specifically target vehicle and mortgage loans, which are considered key areas generating significant currency mismatches.

Under the new regulations, the additional reserve requirement will be triggered when the average daily balance of mortgage and consumer loans (excluding credit cards) exceeds 95% of the May 2026 average daily balance. It will also apply if the obligation surpasses 7% of a financial institution's effective equity. This measure aims to incentivize banks to reduce their exposure to foreign currency-denominated loans and strengthen the resilience of Peru's financial system.

The BCRP plans a phased reduction of these reserve requirements. Starting in December 2027, the percentage applied to the average daily balance of qualifying loans will drop to 80%, further decreasing to 60% by December 2028. From December 2029 onwards, the requirement will be determined solely by the financial institutions' effective equity, with the applicable percentage gradually reduced from 7% to 5% over several years.

Until November 2026, the current reserve regime will remain in place. The BCRP views this policy as a crucial instrument to promote the use of the Peruvian sol in financial transactions and mitigate risks associated with currency fluctuations, ultimately contributing to greater financial stability in the country.