The Costa Rican Legislative Assembly approved in first debate the bill that creates a deposit guarantee fund and resolution mechanisms for the banking system.
The objectives of the deposit guarantee are to protect depositors, particularly small ones, and to strengthen financial stability in the event of a bankruptcy of an intermediary, through timely payments to insured depositors and maintaining confidence in the financial intermediation system is critical to avoid bank runs and protect financial stability, the legislative body explained.
Not considering the costs of the collection process, nor market conditions, are some of the failures that banks identify in the bill being discussed in the Legislative Assembly of Costa Rica.
In Costa Rica a law proposal pretends to reduce by 50% the bank fees on loans for businesses and SMEs, as well as credits for social housing and lower class.
The law project, which was presented to the Congress by the representative, Yorleny Leon, aims to reduce fees in the formalization of bank loans, which currently range between 8% and 10% of total credit.
The Legislative Assembly has approved the absorption of Bancredito by Banco de Costa Rica, which must take on both the entity's assets and its obligations.
After determining that Banco Crédito Agrícola de Cartago (Bancrédito) was not financially viable, last March the National Council of Supervision of the Financial System (Conassif) recommended the absorption of the financial institution, a process that was completed yesterday when the Assembly voted in favor of the suggestion.
A reform of the Development Banking System is stuck in Congress because of a possible tax on offshore banking.
The creation of a tax included in the bill to reform the Banking Development System is impeding its progress in the Costa Rican Congress. MEPs propose a tax of 15% on profits from offshore banking.
The Ministry of Finance projected that the new tax could generate revenues of $28 million annually for the National Development Trust (Finade). The Treasury chief, Edgar Ayales requested that if higher revenues than this are achieved, for the surplus to go to the state.
A year after first being proposed, and under different economic conditions, progress has been made on the adoption of the law to discourage "hot" capital.
From a press release issued by the Legislative Assembly of Costa Rica:
MPs voted in a first debate, to put a brake on the entry of speculative capital into the country, known as hot money, with an initiative submitted for discussion by the Executive.
Congress is analyzing a 15% tax on offshore banks and 5.5% for banks domiciled in the country with presence abroad.
The Costa Rican Congress is considering three options for taxing offshore banking in a bill to reform the development banking system. "One proposal is for a tax of 5.5%, another is to exempt from taxes these type of banks and a third is a gradual tax", reported Nacion.com.
Properties belonging to 130 tourism businesses are at risk of foreclosure because they have not been able to make loan repayments.
On 16 August many small businesses could lose their properties due to non-payment of the loans they hold with financial institutions.
In order to prevent the auction of their properties, micro, small and medium enterprises (MSMEs) in the field of tourism met with the Minister of the Presidency, Carlos Ricardo Benavides and the chief of Tourism, Allan Flores.
Rules for providing housing to the middle class are being approved without adequate studies on their feasibility and functionality within the financial system.
Within the current drive in the search for housing solutions for the middle class sector, three projects have entered the legislative process.
Of the three projects, two have already been made law and one is awaiting approval by Congress in the second debate.
A bill seeks to regulate the information provided by issuers to consumers, and another one sets caps on interest rates.
The first project proposed was by Congressman Luis Fishman, who suggests protecting consumers without affecting free competition among companies, obtaining a reduction in fees and costs.
"There must be regulation for all matters relating to the costs and burdens that are included on the cards, which in many cases are not duly explained to the customer, and contribute to the steady growth of debt and being in arrears" he said.
The bill which taxes interest generated by speculative capital has been stalled because it respective Legislative Commission has not been formed yet.
Edgar Ayales, Finance Minister recalled the significance of the future law and added that the problem could take three or four weeks.
"This is because, according to the vice minister of the same portfolio, Randall Garcia, they have not yet officially named the new team for the Treasury Commission, which manages the topic", reported Prensalibre.cr.
Over the next nine months the Central Bank of Costa Rica will slow credit growth to the private sector, keeping it at below 9%.
Posted under a publication of the Macroeconomic Program for 2013-2014 the measure is temporary and intends to prevent the formation of a credit bubble caused by excess liquidity. During 2012 private sector credit grew by 14.2%.
The idea that the Central Bank of Costa Rica be a fund manager for the Development Bank has been rejected by its President Rodrigo Bolaños.
An article in Nacion.com notes that the strange idea originated in the office of the second vice president of Costa Rica, Luis Liberman, where it probably passed by the Economy Minister Mayi Antillon, who most likely presented it at the Development Bank Commission of the Legislature.
The Legislative's delay in approving international financing could contract credit and increase upward pressure on interest rates.
A bill to authorize financing for the country in international markets through Eurobonds has become stalled in the Legislative Assembly, amid a clash between government and opposition.
The absence of these bonds would force the government to resort to 100% financing in the local market in order to fund its operations, increasing interest rates, according to the former Central Bank President Francisco de Paula Gutierrez.
Changes to the law on development banking have suffered a delay of 5 months, which has prevented the use of $320 million.
Delays to the expected legislative changes to the Law of the System for Banking Development (SBD) now add up to 5 months.
The opposition blames the government for not having pushed a review of the reforms to a special commission. In those five months, the government moved the agenda because they were special sessions, opposition deputies say. However, the Minister of Economy, Industry and Commerce (MEIC) and chair of the governing council of the SBD, Mayi Antillon, said the government left room in Congress for discussion and analysis of the viability of the Solidarity Tax Project .