Costa Rica: Financial Intermediation Margin Decreases
The difference between interest rates and deposit rates in local currency went down from 13.5% in 2005 to 6.8% in 2016.
Tuesday, March 28, 2017
From a statement issued by the Costa Rican Banking Association:
March, 2017. A comparative analysis by the Costa Rican Banking Association (ABC), between 2005 and 2016, with data from the Superintendent of Financial Institutions (SUGEF) shows that the Financial Intermediation Margin (MIF) in colones, has maintained a downward trend, going from 13.5% to 6.8% in that period.
At the close of 2016, the MIF was 6.8% in colones and 3.7% in dollars.
"This reduction in the net interest margin can be attributed to the efforts made by banks to capture and allocate resources more efficiently, despite existing market distortions and quasi - fiscal charges"said Ronulfo Jiménez, Economic Advisor at ABC.
The Financial Intermediation Margin is the resulting difference between the interest rate charged by a bank for loans granted (lending rate) and the interest rate paid by a bank for the money collected (deposit rate).
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The margin of financial intermediation in colones fell by 1.3% and stood at 7.1%, while a rate of 3.5% was recorded dollars.
From a statement issued by the Costa Rican Banking Association:
31 March, 2016. The Costa Rican Banking Association (ABC by its initials in Spanish) presents data on the performance of the Financial Intermediation Margin (MIF by its initials in Spanish) between 2008 and 2015, showing that this was reduced at the end of last year, both in colones and dollars.
The escalation and volatility of the dollar in recent days raised the spread over 3%.
The volatility that has been seen in the exchange rate in Costa Rica in recent days has increased the spread between buying and selling dollars at the counters of financial institutions.
Banks in El Salvador, barred by law from charging management fees, offset their lower revenues by raising interest rates.
According to the president of the Salvadoran Banking Association (Abansa) Armando Arias, "commission (for administration) has been transferred to interest rates." "What they (the banks) have probably done is to take (for example) the $8 which was previously charged as commission and move it across to the nominal interest rate," said the head of Abansa.
The difference in the interest paid by banks on deposits and loans can be as much as 22%.
Intermediation margins are a measure how a financial sector performs its mediation role and is one indicator of efficiency. Though there are various ways to calculate the figure, Costa Rica's margin is higher than in other economies.
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