The monetary policy of Nicolás Maduro’s regime has restricted liquidity in the Venezuelan banking sector, increasing costs for banks. This situation is a result of the restrictions that have been in place since the third quarter of 2024 in the national banking area.
This is stated in the “Venezuela Economic Report. April 2025,” prepared by the Institute of Economic and Social Research (IIES) of the Andrés Bello Catholic University (UCAB), in the section dedicated to analyzing the Venezuelan banking sector.
Despite these restrictions, currency depreciation has benefited financial revenues and the equity of banks by revaluing indexed assets and loans. However, these gains are not sustainable.
The report states that although conditions for non-financial services remain limited, operational revenues have grown due to transactional volume. Banking liquidity experienced a temporary uptick from fiscal collection, yet it remains at low levels, while credit has stagnated or contracted.
Stagnation of the Credit Portfolio
The UCAB report indicates that the credit portfolio of the Venezuelan banking sector —measured in U.S. dollars— has stagnated and then decreased since December 2024, reflecting liquidity restrictions, although credit intermediation showed a temporary rebound due to exchange rate depreciation.
“Since the third quarter of 2024, the banking environment has become more restrictive due to monetary policy measures implemented in October 2024 and February 2025. These measures have tightened banking liquidity conditions and generated significant costs,” states the report.
Moreover, financial revenues grew significantly since October 2024, driven by currency depreciation, while operational revenues also increased due to higher transaction volumes. This occurred despite constraints on rate adjustments and foreign currency transactions.
Bank equity, driven by currency depreciation, showed a sharp increase since October 2024, although this growth isn’t based on a structure that ensures long-term sustainability.
Consequences of Currency Depreciation
In this context, this new monetary structure limits the credit intermediation of the banking sector, creating a significant challenge for banks’ financial management.
Additionally, currency depreciation —intensified since October 2024— positively impacted the financial and equity results of banks. It’s important to note that this recovery isn’t rooted in solid foundations for long-term stability.
Currency depreciation has also increased financial revenues from indexed loans, as the value in bolívares of the capital of these loans rises.
Another consequence is that equity accounts have benefited from the revaluation of foreign currency assets and from net gains due to the variation of capital associated with the indexing of the loan portfolio.
However, a new alert arises: “Nevertheless, these recoveries aren’t based on solid fundamentals that ensure stability and sustainability in banking management.”
Operational Limitations in Non-Financial Services
UCAB analysts believe that despite the growth in operational revenues of the Venezuelan banking sector —driven by transaction volume— the management of non-financial services remains limited by significant factors.
What factors?
Delay in Fees and Commissions
There is a considerable delay in adjusting banking fees and commissions, which have not been updated since November 2022. This is despite the high accumulated inflation and rising transformation costs.
Restrictions on Foreign Currency Transactions
Numerous restrictions hinder the provision of transactional services in foreign currencies in a bi-monetary environment, despite the existence of significant deposits in foreign currencies. This situation encourages the use of cash in foreign currencies outside the formal banking system.
Resurgence of Inflation
The resurgence of inflation affects the operational costs of banks.
Evolution of Banking Liquidity
The UCAB report refers to banking liquidity, measured by the Excess Bank Reserves (RBE)/Total Deposits indicator, which showed a significant contraction after a rebound in the third quarter of 2024, returning to low levels.
Since October 2024, liquidity has contracted due to three key elements:
the evolution of primary money,
the path of the exchange rate,
the tightening of restrictive monetary policy.
The removal of reserve discounts and the establishment of stricter restrictions have sharply increased reserve requirements, raising the required coefficient from 44% to 58%, complicating adjustments for banks and leading to a return to reserve deficits.
Furthermore, the elimination of remaining discounts to allow for a single fixed value discount equivalent to the reserve deficit that occurred on February 10, 2025, significantly reduced deficits in the short term. Additionally, the Annual Base Interest Rate for Charge of Reserve Deficit (TIBACDE) was doubled, significantly increasing the cost of incurring deficits.
The aforementioned measures are highly restrictive in the medium term. The doubling of the TIBACDE makes incurring deficits much more costly. The fixed single discount will become proportionately smaller as deposits grow, increasing the required reserve coefficient. It is expected that by June 2025, the required coefficient will return to levels close to those of October.
Credit Behavior
Next, the UCAB report mentions that the total credit portfolio of banks —measured in U.S. dollars— stagnated starting in October 2024 and experienced a continuous decline from December 2024 to February 2025.
It adds that the intensification of liquidity restrictions led to a contraction in credit. The public banking sector reacted immediately with a contraction, while the private banking began to decrease in December 2024.
The report highlights that the Credit Intermediation Coefficient (CIC) showed an initial rebound following the restrictive measures of October 2024, despite the contraction of credit. This is related to currency depreciation, as the credit portfolio (numerator of the CIC) is fully indexed while deposits (denominator) are partially indexed. The depreciation increases the value of the numerator in bolívares.
Dynamics of Foreign Currency Deposits
Analysts indicate that the share of foreign currency deposits in the total deposits of the banking sector has remained low —around 23% as of February 2025— despite exchange rate instability.
The low participation may be connected to the persistence of an exchange rate gap and ongoing transactional costs.
These deposits represent a significant amount that isn’t leveraged for credit intermediation due to restrictions, limiting the productive apparatus’s leverage.
Financial and Operational Revenues
Financial revenues —the report continues— saw a significant increase starting in October 2024, driven by currency depreciation. Operational revenues also showed an upward trend, associated with transactional volume.
There was a substantial increase between September 2024 and January 2025 of 235%, directly related to the depreciation of the exchange rate and the revaluation of capital of indexed loans.
The growth of operational revenues continued in the second half of 2024, fueled by the increase in transaction volume through banking payment channels.
The share of operational revenues in total revenue changed abruptly starting in October 2024, decreasing from 68% to 45% in February 2025. This change is due to the increase in financial revenues from currency depreciation, not from greater credit activity. Its continuity depends on the persistence of the depreciation.
Recovery of the Equity of the Venezuelan Banking Sector
The UCAB report emphasizes that after a contracting period, the equity of the Venezuelan banking sector experienced pronounced growth from October 2024.
It concludes that currency depreciation is the determining factor behind this recovery, both due to the revaluation of assets in foreign currency and income derived from the revaluation of the capital of indexed loans.
It is stressed that this recovery isn’t based on solid economic foundations to ensure strength and long-term sustainability, which would require greater fluidity in credit intermediation and provision of non-financial services.
Equity indices returned to growth, remaining at ample levels that reflect the underutilization of the banking sector’s capacity to leverage the economy due to severe liquidity restrictions limiting credit intermediation.
Context of Low Aggregate Demand
The situation of the Venezuelan banking sector occurs within the context of low aggregate demand, stemming from the reduction of household disposable income. This is reflected in falling commercial sales.
UCAB analysts conclude that the banking sector faces a challenging scenario marked by restrictive monetary policy and operational limitations, constraining liquidity and credit intermediation.
They warn that while currency depreciation provided a temporary boost to revenues and equity, this recovery is not sustainable in the long run without fundamental changes that promote greater credit activity and efficiency in non-financial services. All this within a macroeconomic context of low aggregate demand.