Various types of loans are made directly or indirectly to municipalities.These loans are repaid through general cash flows or through specific revenue streams, such as water and sewer fees or stadium and parking fees.
Category 3 - Debtors with compromised repayment capacity: Debtors with bad credit standing, less than 120 days behind on their payments or in delivering the information requested by the institution.
Institutions classify direct and contingent loans granted to non-financial sector individuals or legal entities as Commercial, Consumer and Housing, according to the destination of the loans.
The breakdown of the categories and criteria to rate each type of debtor and portfolio can be found in the regulations of the Superintendency.
Over the past several years, examiners have observed a shift in smaller project financing away from capital markets to financial institutions.
During the Great Recession, some municipalities either lost their investment ratings or saw their bond insurance premium costs increase; therefore, the cost of issuing debt securities in the capital markets increased.