Measures to Reduce the Risk of Credit Default

With the aim of making the classification of debtors more flexible and reducing the risk of non-payment, in a context where delinquent loans keep on rising, Costa Rica authorized the modification of two regulations that apply to entities in the financial system.

Friday, June 14, 2019

The General Superintendence of Financial Entities (Sugef) and the National Council of Supervision of the Financial System (Conassif), informed that changes were made to the "Regulation for the qualification of debtors" and the "Regulation on management and evaluation of credit risk for the development banking system", which ultimately aim to give access to new credits to about 63 thousand people.

You may be interested in "Bank Credit Slows down reviews that "... One of the actions allows lenders to move from level three (or high-risk level) to operations of people who have a healthy track record in the last 48 months on other debts. These are people who failed to pay, for example, a credit card, but maintain up to date credit for a home. That will move 63,000 people from level three (highest risk) or level two to level one and then back into credit."

Another of the changes that were made is to allow "... financial institutions to make debt adjustments or payment arrangements (readjustment, extension, refinancing or a combination of them), twice to the same person, in 14 months, without it being classified as an impaired credit operation.

Also see "New Measure to Boost the Economy

These changes take place in a context in which the government has made other efforts to energize the issuance of credits, since at the beginning of the month the Central Bank decided to reduce from 15% to 12% the minimum legal reserve rate that institutions of the banking system must maintain as a reserve.

Another action of the authorities was the reduction from 5% to 4.75% of the Monetary Policy Rate, a decision taken by the Central Bank at the end of May.

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