The Central Reserve Bank, the sole bank of issue, was established in Lima in 1931 to succeed the old Reserve Bank. Also created in 1931 was the Superintendency of Banks and Insurance, an agency of the Ministry of Finance, which defines procedure and obligations of banking institutions and has control of all banks. The government-owned National Bank (Banco de la Nación) not only acts as the government's tax collector and financial agent, but also is Peru's largest commercial bank. Another government agency, the Caja de Ahorros, provides secured loans to low-income borrowers. The government-owned development bank is COFIDE. There are 15 commercial banks in Peru.
Peru's banking sector has grown rapidly as a result of the economic recovery and capital inflows into the financial system. A decade ago, in 1987, the president of Peru was contemplating nationalizing the entire system. Shortly after his election, Mr. Fujimori decreed the abolition of the state's development and mortgage credit banks. Today, only COFIDE offers state-regulated development assistance, but as a second-tier bank channeling funds from other institutions and without the powers to raise financing on its own account. Along with the subsidized state development banks, a host of savings and loans cooperatives have disappeared, victims of financial mismanagement, hyperinflation, and embezzlement. With them went the savings of many lower and middle-class Peruvians, who have been left with a distrust of the financial system.
Financial operations and assets remain concentrated: four banks account for over 60% of all loans, and almost three-quarters of all deposits in the system. During 1997, commercial bank loan portfolios grew by approximately one-third. Total assets of the banking system amounted to $18.8 billion in 2001. Peru is severely underbanked. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $6.1 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $17.4 billion. That year, the discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 14%.
The privately owned Lima Stock Exchange (Bolsa de Valores de Lima—BVL) regulates the sale of listed securities. Securities exchanges actually began in Lima in 1860, but the stock exchange in its current form was founded in 1971. There was a long bull run in 1992 as the economy stabilized after the coup and progress towards pacification was made. After falling by 27% in 1999 and 34% in 2000, the dollar value of the index dropped only 2.6% in 2001. At the end of 2001, 207 companies were listed on the BVL, and the market capitalization was $11.1 billion.