New Measure to Boost the Economy

In order to boost credit issuance, the Central Bank reduced from 15% to 12% the minimum legal reserve rate that institutions in the banking system must maintain as a reserve.

Monday, June 3, 2019

The new rate, which will come into effect on June 16 of this year, has not been reduced since 2002, and the authorities expect that this decrease will generate a greater availability of loanable resources in colones, as well as a reduction, for financial institutions, of the cost of raising funds in national currency.

You may be interested in "Bank Credit Slows down”

From the BCCR statement:

San José, 3 June 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR) agreed on Friday, May 31, 2019, to reduce the minimum legal reserve ratio (LFE) from 15% to 12% (3 percentage points) for deposits and obligations in national currency that financial intermediaries must maintain in the Central Bank. The new rate will come into effect on June 16 of this year.

Additionally, the governing body decided to maintain at 15% the minimum legal reserve rate on deposits and obligations in foreign currency.

EML is a reserve of money that public and private banks, non-bank financial companies and mutuals must maintain in the Central Bank of Costa Rica, in the form of current account deposits. The amount of EML that each entity must maintain is calculated by multiplying the EML rate by the total amount of obligations (deposits and collections) through the financial intermediation that each entity has.

Read full statement (In Spanish).

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More on this topic

Costa Rica: Monetary Policy Rate Drops to 2.25%

January 2020

Arguing that in 2020 and 2021 inflation is expected to remain within the target range, although below its average value of 3%, the Central Bank reduced the monetary policy rate from 2.75% to 2.25%.

Over the next two years, the central bank's monetary policy will continue to be aimed at keeping inflation low and stable and supporting economic activity, in line with the counter-cyclical stance it adopted from March 2019, reported the Central Bank of Costa Rica (BCCR).

Expectation for Changes in Monetary Policy

September 2019

Although the downward adjustments made months ago in the bank reserve and monetary policy rate do not yet appear to have had an effect on the loan portfolio in Costa Rica, banks expect credit to be reactivated soon.

At the beginning of June, the Central Bank reduced from 15% to 12% the minimum legal reserve rate that banks must maintain as a reserve, arguing that the objective was to make credit more dynamic.

Economic Recovery Measures Are Not Enough

June 2019

The effects of the reduction in the Monetary Policy Rate and the lowering to 12% of the minimum legal reserve for banks will take months to be perceived, and without other parallel actions that impact the business sector more quickly and effectively, the economic reactivation of Costa Rica will not be possible in the short term.

According to the latest report of the Central Bank of Costa Rica (BCCR), when comparing the level of economic activity recorded in March this year with the same month of 2018, it is observed that most economic activities slow down their growth, which was reflected in the slowdown of the general indicator. See full report.

Restrictive Liquidity Measures of in Honduras

May 2012

A new monetary policy prepared by the Central Bank of Honduras affects the competitiveness of the financial sector and credit availability.

Honduran banks reduced by $1,500 million the amount available for loans to the productive sector and may raise interest rates in light of provisions by the Central Bank of Honduras.

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