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 Nacion.com 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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