Costa Rica: More Credits on Default

Late loans granted by public banks to small companies amounted to 5.5% in May, 3.8% in the case of medium-size companies and 3.3% in the case of large companies, a situation attributed to the economic slowdown.

Friday, June 21, 2019

The percentage of credits reported by the General Superintendence of Financial Entities (Sugef), refers to loans that went into default for more than 90 days and judicial collection, granted by public entities such as the National Bank, Banco de Costa Rica and Banco Popular.

Bernardo Alfaro, head of Sugef, explained to that "... the increase in delinquencies in public banks, and other financial institutions, is linked to the negative impact of the economic slowdown in Costa Rica, lower credit dynamism and unemployment. An upward delinquency is always a cause for concern and, of course, it keeps us vigilant and busy."

See "Costa Rican Economy Keeps Slowing Down

Regarding the low dynamism of the Costa Rican economy, the latest report of the Central Bank of Costa Rica (BCCR) informed that the Monthly Index of Economic Activity reported in April a year-on-year increase of 1.6%, a variation that is lower than the growth of 1.8% reported in March.

According to the report, except for financial services and electricity and water, the rest of economic activities grew less, or even had negative variations over the previous year, as is the case of the agricultural industry, construction and trade.

Allan Calderon, deputy manager of Credit and Risk of the National Bank, said that "... the increases in default are caused by factors of the economic cycle. There are specific collection management programs and payment arrangements for all customers who require it, or even that are identified as having some problems in the coming months.

In addition to the increase in credit default, the placement of loans has also shown an unfavorable behavior for banks, since between October 2018 and March 2019 the year-on-year growth of credit has generally slowed, as the increase in the portfolio of private banks fell from 14% to 12%, in public banks the decrease was from 1.37% to 0.75%, and in the case of other financial intermediaries the decrease was from 8.86% to 6.97%.

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More on this topic

Costa Rica: Bank Arrears Upward

December 2019

In the last two years, 100,000 loans that were up to date became arrears, and bankers attribute this mainly to the increase in unemployment and the decline in economic activity.

The slowdown that the Costa Rican economy has suffered in the last two years is taking its toll not only on businesses and families, but also on the banking sector.

Unpaid Bank Credits Increase

April 2019

In Costa Rica, low economic activity and rising unemployment explain the 25% increase reported between February 2018 and the same month of 2019 in the value of assets acquired by banks to recover loans.

Figures from the General Superintendence of Financial Entities (Sugef) specify that between February 2018 and the same month of this year, the amount of goods and securities acquired by financial entities because people and companies did not pay their loans increased from $425 million to $533 million.

Costa Rica: Credit Moratorium in Dollars Increases

November 2018

From July 2017 to September 2018, the percentage of loans in dollars with payment arrears over 90 days or in legal collection increased from 1.57% to 2.95%.

The default on dollar loans is still under 3%, which is still considered normal. However, according to the trend reported in recent months in the records of the General Superintendence of Financial Entities (Sugef), the indicator is likely to exceed the 3% barrier.

Complicated Economic Scenario

September 2018

The deterioration of the economy and rising unemployment are the main reasons behind the difficulties faced by companies and individuals in Costa Rica in paying back their bank loans.

According to figures from the General Superintendence of Financial Entities, between January 2017 and July 2018, the percentage of loans in defaults for more than 90 days or in judicial collection, went from 1.65% to 2.51%, showing an upward trend in recent months.

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