Acceptance of insurance for exchange rate volatility low

Some sectors say that the regulation is not very practical nor strict enough in the process of authorization.

Monday, September 1, 2008

The regulation to offer exchange rate coverage to companies or economic agents who want to protect themselves from sudden changes in rate of exchange is said to not be very practical or strict enough in the requirements that is placed on the banks who offer these products.
The new law, in effect since June 13, seeks to offer to exporters and importers options that they can contract with banking or financial entities, for example, exchange rates to be applied in the future for a specified transaction.



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Banks with Less Freedom to Handle Dollars

January 2017

Starting December 22nd 2016 a new rule applies that prevents banks in Costa Rica from deciding how much of their capital they want to hold denominated in dollars and how much in colones.

In an attempt to gain more control of the risk involved in foreign exchange transactions by banks and their impact on the exchange rate, the Central Bank has changed the rules for foreign exchange cash operations, forcing banks to change the composition of their assets so that the proportion denominated in dollars is equal to the proportion of assets in that currency.

Protection Against the Fluctuations of the Dollar in Costa Rica

February 2014

Three banks are offering companies hedging instruments to combat volatility in the exchange rate.

Banco Nacional, Citibank and Davivienda bank are the financial institutions in Costa Rica authorized to offer currency hedging instruments which enable companies to fix a certain exchange rate for future transactions, eliminating the uncertainty generated by the price volatility of the foreign currency.

HSBC Costa Rica Authorized to Offer Currency Derivatives

January 2012

Following the adoption of a regulation by the Central Bank Board, the bank HSBC is the first to offer this service.

Currency derivatives ensure the value of a currency, by using a contract in which the price of the currency at a future date is agreed on.

Amedeo Gaggion, manager of financial markets at HSBC, told Nacion.com, "Forwards are bilateral contracts in which an exchange rate is fixed for the closing day of the transaction. These type of instruments are used to hedge risk and uncertainty in transactions involving different currencies. "

Currency Hedging

May 2010

High volatility in the value of the Costa Rican colon versus the U.S. dollar has fueled demand for financial derivates to hedge from such risks.

These products have been available in Costa Rica since 2007, but they have only recently been requested by investors, as the exchange rate has been extremely volatile as of lately.

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