A bill prepared by the Central Bank would require all financial entities to request authorization from the institution before obtaining dollar loans from abroad.
With this measure and others such as modifying the legal reserve requirement in foreign currency, which currently stands at 15%, the Central Bank of Costa Rica aims to stop the growth that has been seen in loan portfolios in US currency.
For the first time in nine years, the Federal Reserve has raised the benchmark interest rate, by 0.25%, starting off a process of a gradual adjustment which will make credit more expensive.
After seven years of interest rates at historical lows, signs of recovery in the US economy have led the Federal Reserve to announce the first upward adjustment in the federal funds rate, the main reference rate for structuring interest rates in the United States and around the world.
A bill intends to reduce the cost of financing using mortgage securities or collateral by reducing registration costs and mortgage pay off fees.
Private sector representatives explained to Trincheraonline.com that what is sought is to "... make it less costly for the producer to put up their property as collateral in order to obtain the financing they need."
The lending rates of Banco Nacional recorded an average reduction of 3.77% since January this year to date.
The reductions made by the Central Bank in monetary policy rate so far this year are beginning to have an effect on the structure of interest rates in banks. Banco Nacional, the largest in the market, recorded a drop of almost 4 percentage points in the interest rates for loans.
Between December 2014 and September 2015 the average lending rate in private banks fell by 2.5%.
Data from the Central Bank of Honduras and the Honduran Association of Banking Institutions (Ahiba) indicates that up to October 2, 2015 the lending rate on loans in the national currency was 13.46%, 15.30% lower than last July, reports Elheraldo.hn.
A regulation currently under public consultation would increase the reserves that banks must have before lending dollars to those whose income is generated in colones.
This would be one of the new requirements covered by the regulation that the Superintendent of Financial Institutions (SUGEF) put to consultation earlier this month.
The Financial Superintendency plans to increase reserve requirements for banks that lend in dollars to companies that do not generate revenue in that currency.
As a measure to prevent the growth of dollar loans to individuals and companies that do not generate income in this currency, the Superintendent of Financial Institutions (SUGEF) said it plans to raise reserve requirements for financial institutions and banks in order to address payments in arrears by debtors. Currently the requirement is 0.5% of the balance due.
The good economic performance is reflected in the loan portfolio of the banking system, driven by the livestock sector, consumption and commerce, which in May had a growth rate of 18%.
From The "Monetary and Financial Report 2015," by the Central Bank of Nicaragua:
As of May 2015, the financial system remains stable, with credit and deposits growing, albeit at a slower pace than in the same period in 2014.
Excess dollars due to higher income from remittances and foreign credit lines account for the 18% increase in the loan portfolio in that currency.
The reporting period is the year between June 2014 and March this year.
The increase in remittances and credit lines that banks have externally has generated a surplus which the banking system captures and re-enters the market through loans.
In April this year the mortgage loan portfolio of the banking system amounted to $12 billion, 15% more than in the same month in 2014.
The growing demand for homes in Panama is the main factor behind the steady growth in mortgage lending, which is expected to continue rising due to the deficit that still exists in the availability of housing.
The growth in the portfolio between April 2014 and March of this year was $1.545 billion.
Despite the decline in the sector, the balance of agricultural loans is growing and April 2015 amounted to $1,448 million, with BNP, Global Bank and Multibank granting the most loans.
Figures for April 2015 show that the National Bank of Panama (BNP) has a balance of agricultural loans of $445 million, Global Bank with $300 million, Multibank with $162 million and Banistmo $110 .
The slow speed at which tasks are executed by civil servants means that the Development Banking System is still not working despite the urgent need of the productive sector.
The private sector is complaining that resources in the Development Banking System are still locked up because a member of the governing council has not yet been appointed .
The Minister of Agriculture, Luis Felipe Arauz, responded to the complaint noting that analysis has been completed of the three candidates for the post, and tomorrow approval "could" be given by the Governing Council for the appointment of the representative from the College of Economic Sciences.
Since mid-2014 credit unions and mutuals have had to increase their reserves due to an increase in expected losses by banks.
The need to increase reserves due to increased losses expected to be suffered by institutions for non-payment of their debts is mainly due to a greater number of "bad debtors" according to an article on Elfinancierocr.com.
Of all the financial institutions analyzed, savings cooperatives and credit unions whose primary loan portfolio is mortgages, are those with the highest percentages of reserves. The Superintendent of Financial Institutions states that "the level of normality of estimates must be equal or less than 1.7% of all loans."
Compared with other economies, the indicator measuring non-payment in the banking system is relatively small, with marked fluctuations in different sectors.
An article on Prensalibre.com reports that according to the Superintendency of Banks (SIB), the indicator for defaults in the Guatemalan banking system "went from 1.55% in May last year to 1.43% in the same month this year."
Six financial institutions have been authorized to provide loans under the conditions imposed by the Development Bank, with interest rates of 3% in dollars and in line with the passive base rate in colones.
Welmer Ramos, chairman of the Governing Board of the Development Banking System commented that "... 'These programs involve interest rates that are half the rates that currently exist for the same activities.'"