The role of banks in the COVID-19 pandemic, the credit that resumes growth, the reconversion of the sector's business model, the de-dollarization promoted by the Central Bank and other aspects. The president of the Association of Private Banks (ABPU) and CEO and country head of Scotiabank Uruguay, Horacio Correge, spoke about this in an interview with El Country.

-In May 2020 said in an interview with El País that banks were called to be part of the solution, unlike previous crises that began in the financial system, How do you assess that this role was played?-That was the case, when the pandemic began, at a time of high uncertainty, the banks brought certainty to the market, assuming the responsibility that fell to them and bringing relief to their clients. Then throughout the pandemic, the banks were up to the task, in the sense of providing the support that companies and different consumers needed throughout the entire pandemic. Uruguay handled the pandemic very well and stands out from other countries. The pandemic exposed, in some way, a lot of the political regimes and the leaders did not measure up. It was not the case of Uruguay, beyond that at some point we did not have it easy. The bank was a relevant actor that, at least in Uruguay, helped to cope with the pandemic situation, supported by regulations that allowed us to adopt certain flexibilities and others. But also in the case of small companies that are more vulnerable to economic cycles, there was a government guarantee program and the banks obviously had a very important development in serving this segment and obviously in credit to people who in the In more delicate moments, we offered rescheduling, and later we were with them to attend to and meet their needs, and also when other issues such as changing the car or the house were raised, the banks were also there. The balance after almost two years of the pandemic, of how the banks acted, is very positive.

-The BCU allowed banks to reschedule loans without having to punish them with a category change. There was fear that when that flexibility ended, delinquency would skyrocket, but in the end it did not happen. What influenced that?-I think the rescheduling timing worked well and Uruguay also has a financial market that is fundamentally made up of high-quality institutions. If you see a delinquency indicator for companies, today we are seeing the lowest we have ever had. And we say that going through 2020 where the Gross Domestic Product (GDP) fell by 6%. Today, companies have a healthy financial situation, their balance sheets are in order and they are in good shape to capitalize on the improvement that is already glimpsed in economic terms in general. Obviously, there were sectors that were more affected by the pandemic and there were the banks with the appropriate tools to provide support and there were other sectors that had a better or not so bad time during the pandemic. In general, the (credit) portfolios are in very good health, as we had not seen for a long time.

-Credit began to increase after several years of stagnation. How do you see this reactivation of credit and why is the financial system still very liquid and with a great capacity to lend?-In general, credit banks on the one hand, we managed to transmit in society the appropriate levels of trust so that they trust the bank with their deposits, their savings, not only transactional but genuine savings. It is true that credit levels in the system based on GDP are low compared to developed economies, but if you compare them with our neighbors, it may not be so low. Of course, within the business agenda of the banks in particular, and the development of the country, there is room for growth. But, we are not going to boost credit at the cost of making bad decisions. Bank credit covers a part of the credit demand, which is generally short and medium-term investments, which are reasonably well covered. And to the extent that a reactivation of the economy in Uruguay begins to be seen, we are going to close a year of growth above 3.5%, next year there are expectations that Uruguay will grow around 3%, we are seeing the arrival of investment projects and there is a general improvement in the business climate and the increase in credit goes hand in hand with this improvement in expectations. With which, I would expect that in 2022 credit will continue on that path of growth.

-As president of the ABPU, what is the issue that causes you the most concern?-Today I would say that the ABPU's agenda comes from working together with authorities and the Central Bank (BCU) on issues that concern banks. On the one hand, they have to do with the development of a growth agenda, development of means of payment systems, making investments viable so that in an industry that is capital-intensive such as banking and that operates in a limited market such as In Uruguay we can have banking development in accordance with the standards of the most developed countries. And hand in hand with the reconversion of our business model, going to a model that is much more focused on digital technologies, new risks are also emerging, such as all cybersecurity issues and that is what we are working on . Banks refocus our investments much more towards digital and that implies reviewing our physical presence. It is something that is happening in Uruguay and in the rest of the world and we see that this trend will continue in that direction. -Does the bill that refers to changing how usury caps are adjusted worry you?-Let's see, it worries us to the extent that it is not correctly implemented. As banks we know that we operate in a regulated industry and we have always had regulations of all kinds. Now, note that if these regulations are not properly implemented and we do not take advantage of the opportunity to use the experiences that have happened in other markets, they can end up being counterproductive. Clearly, if you are very linear and very aggressive in lowering the rates that you allow financing, what you end up causing is that there are sectors that are excluded from credit. And it is not that at the end of the day these sectors are not going to be credit users, but that they end up being users of an informal system, in which there is no BCU regulation, there are no transparent information systems and there are no due processes and guarantees for those people who are going to get into debt, with which at the end of the day they end up borrowing at higher rates and without any type of protection. We believe that today the financial system in Uruguay is relatively complete, in the sense that we have world-class banks and financial companies that serve certain segments that do not have access to banks, with which there is an offer pretty full credit.

-How do you see the BCU's initiative to de-dollarize the economy and what can banks do, given that part of the problem is that deposits are 80% in dollars and that has other consequences regarding the ability to lend in national currency?-The de-dollarization of the economy is one of the relevant issues that the BCU has transmitted to us when it presented its strategic agenda for the five-year period to the ABPU. Now, there is a cultural issue and expectations, which basically goes through monetary policy. In the last 10 years, more than 90% of the time, inflation has been outside the target that the BCU has set. There is a first step for the monetary authority to make inflation expectations credible. What can banks do? People trust the dollar and deposit us in dollars, 80% of our deposits are in dollars. Obviously we can complete the offer of active and passive products in pesos. We have an offer that we believe is adequate to the demand that exists today, because there are short-term consumer loans, long-term loans in pesos with inflationary protection coverage because they are in Indexed Units (UI) and on the savings side. We also have the instruments. Most people prefer to safeguard the fruit of their efforts, which are savings, in dollars, but there is also the possibility of making fixed terms in pesos, which today due to monetary policy, real rates are negative (lower than inflation ). But also in the case of Scotiabank we have developed savings bank products in UI, so if the short-term concern is to hedge against inflation, we believe that there is an attractive product there. And despite the attractiveness and that from a formal point of view you can build the case for any investor that in certain scenarios it would have been much better to save in pesos than in dollars, at the end of the day the investor decides with his stomach and trusts in the dollar. We have not had all the acceptance that we would have expected in the product, we believe that it is also a matter of maturation, but that it goes hand in hand with greater credibility of the local currency and a greater fight against inflation. I know it is a priority on the agenda of this BCU.

-The BCU has been increasing the monetary policy rate in its last meetings, and it will continue to do so. Is that rate going to be transferred to what banks pay for deposits and charge for credits or is it still too early?-It's early, but that will transpire, because as the cost of money increases, obviously depending on the capacity of the market to absorb this higher cost, it could There must be a clear shift in certain sectors. In what has to do with corporate segments that borrow and take the yield curve as a reference, that is surely the case. On the passive side, it will also depend on the funding needs of the bank. Today the bank is very liquid, especially in dollars, perhaps not so much in pesos. So, if there begins to be a demand for pesos and the pesos begin to be a scarce resource, perhaps then we will begin to see better rates when capturing deposits.

-What has Scotiabank's vision been in these two years of the pandemic?-In the last year, there are certain segments that have evolved very positively, our line of business of mortgage loans It has had record months of operations in recent months. Everything that has to do with the development of the automotive market has had a very good evolution. The SME segment, which, although it had the support of the state guarantee system, also had a very good evolution and credit growth, our corporate segment grew well and there was also an increase in deposits. As the economic situation and expectations begin to improve, we are also seeing a return in consumption levels with the consequent improvement in consumer loans, the evolution of the means of payment business and others. We are closing the year with a very good moment and that makes us have expectations for next year.

-Scotiabank has its credit manager, Pronto! How has the business been there?-We may have taken a cautious approach regarding the offer of consumer loans until we understand what was It happened with the pandemic. To the extent that we have witnessed a recovery in employment levels in recent months, recovery of lost jobs, we refocused our strategy based on this evolution and today we are growing at good levels and with low delinquency rates.-Is the financial company more of a business than the bank?-These are two important businesses for us in Uruguay and they are complementary. The bank has great strength in everything that has to do with serving the banking segment and a competitive advantage in attracting public and financial savings. It has a competitive advantage in origination, service and product to the segments of consumer loans it serves. The optimal model has to do with that complementarity.

-You mentioned digitization at the bank level, what is Scotiabank doing in Uruguay in that sense?-We are working on strong investments in digitization, not only for the customer. We are in a process of reconversion of our service model, where every day customers ask us to travel more what has to do with digital, we are investing heavily in what our app is, we are going to have a new sales app, we have our payment solution. But it is also very important to work on everything that has to do with end-to-end processes so that the experience is digital in terms of being able to provide services. This requires significant investments in processes and technology. We are also working on a strong process of cultural change, which has to do with changes in the ways of working such as the adoption of agile methodologies and the incorporation of new skills and talents. The adoption of hybrid forms of work (face-to-face and teleworking) is also a reality within the bank. -Some banks have opted for their own technological development, such as Itaú, others have opted more for acquiring fintechs such as Santander. In the case of Scotiabank, what is the approach?-Locally, we rely on what has to see with our own developments and we work with local suppliers. We somehow have the advantage of belonging to a world-class bank, which has established digital factories in other geographies where it makes partnerships or incorporates technology companies. We leverage in Uruguay on these good work practices or developments to be able to capitalize on them locally.

-Regarding the customer profile, is Scotiabank going to further segment the customer it targets?-Today Scotiabank is celebrating its 10th anniversary in Uruguay. Five years ago it acquired the operations of Discount Bank, thereby building a customer base there. If you look at Scotia's value proposition and brand positioning and customer base, it leverages the operations acquired from both Banco Comercial and Discount but today it has a much stronger brand positioning, much more robust and with a much more complete value proposition that serves the different segments. We have a proposal that is strong for the high-income segment, but we also have proposals for the mass segments and we also serve emerging segments through the financial company that is Pronto! We have great strength from the institutional point of view and value proposals that meet the needs of each segment.

What expectations do you have for Scotiabank in the coming years?-Scotiabank is called to be a relevant bank within the Uruguayan economy and in each of the geographies where it operates. We act with a purpose and with a dream that is to make life better for those people in the communities where we are and make their dreams viable. If they are companies, make their investment projects viable. If they are people, allow them access to their own home, allow them vacations, their children's education, access to a car. That will not change. The business model will change, but the raison d'être of our business will remain over time.