Unpaid Bank Credits Increase

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.

Monday, April 29, 2019

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.

According to data from Sugef, of the $533 million reported to February and that almost all are real estate, 75% corresponds to goods collected by public banks, 16% to private and the remaining 9% to financial companies, cooperatives and others.

Bernardo Alfaro, head of Sugef, told Nacion.com that "... Currently there seems to be little demand for goods, so it is likely to remain longer than usual in the hands of financial institutions. So they seem to be combining the effect of two factors: more executions for non-payment and more difficulty for the subsequent sale of assets available. The main trigger seems to be low economic dynamism and relatively high unemployment."

See "Economic Activity Remains Low" and "Unemployment Keeps Rising in Costa Rica"

Regarding the results of the banks, Alfaro added that "... The higher delinquency, the higher risk in portfolios, and consequently the estimates on credit and on assets available, always affect the results of banks. Let's remember that since the legal collection process begins, there is already a constitution of estimates for the deterioration in the quality of those loans."

Regarding credit default, at the end of last year it was reported that between September and December 2018, the proportion of loans with payment arrears greater than 90 days, or in judicial collection, decreased slightly from 2.58% to 2.14%.

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More on this topic

Costa Rica: More Credits on Default

June 2019

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.

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.

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.

Return of Goods Purchased on Credit Increases by 77%

March 2009

The Superintendent of Financial Institutions of Costa Rica reported that the repossession of property for unpaid debts rose 77% from February 2008 to February 2009.

The increase in auction advertising for goods recovered by the banks is well-known, especially for real estate and cars whose owners cannot continue to make the monthly payments due to loss of income, unemployment and primarily because of the increase in interest rates.

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