Rate Hike Worries Banks in Costa Rica

A passive base rate in excess of 12% would be problematic, affecting the behavior of borrowers and is likely to cause an increase in defaults.

Monday, May 14, 2012

The Passive Base Rate (PBR) reached 10% on May 9, a level not seen since October 2009. The banks set their interest rate according to the PBR and charge an additional margin. It is estimated that there are 400,000 public bank transactions related to this indicator, reported Elfinancierocr.com.

Financial institutions are beginning to take action. They are trying to reduce their profit margins so as not to drown credit users and to avoid an increase in defaults. In 2011, the public bank’s judicial collection management portfolios grew by 27%.

"Bernardo Alfaro, deputy risk manager at the Banco Nacional (the state entity with the highest default), said they had expected that arrears over 90 days would be maintained at between 2.7% and 3.0% but this year if the PBR increases, late payments will rise."

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