November 2006: Banks Facing Up to the Yield Curve

The banking industry in Puerto Rico has enjoyed record profitability and relatively low to none failure rates in recent years. This scenario contrasted with the 1980’s when turbulent economic conditions, the crisis in the savings and loan industry, and a highly volatile interest rate environment placed the banking industry both in the US and in PR under severe stress. More recently, the banking sector in PR has suffered a death of a thousand cuts. Will this sector heal from its main wounds: the living and dynamic yield curve and the ongoing economic downturn in the island? What does an inverted yield curve suggest for the future of this economy? Find out how movements in short and long term rates are affecting local banks’ performance in Puerto Rico.