Public banks in Costa Rica are competing with the state, paying almost 10% interest in order to raise funds in local currency.
The three state banks and the Banco Popular are offering an interest rate of 10%, while private banks are paying 9% on deposits on terms of between 5 and 7 months.
The basic passive rate has gone down and stands at 8.75% from Thursday 16th until next Wednesday 22nd February.
"The decline in the indicator is driven by a decline in average rates paid by public commercial banks, it went from 8.90% to 8.73%. These entities are those with the most weight relative to the calculation made by the Central Bank of Costa Rica", reports Elfinancierocr.com
Interest rates for housing and consumer loans, among others, have risen since last November.
In the case of mortgages, the interest rate applied by state banks rose from 9.43% in November to 9.84% in January and the rate applied by private institutions moved from 8.32% to 8.68% in the same period.
From today the basic passive rate (TBP in Spanish) rose half a percentage point to settle at 8.5%, a level not seen since May 2010.
"The increase was caused by higher deposit rates at state-owned banks, which are the entities that carry the most weight in the definition of the TBP.
According to information from the Central Bank of Costa Rica (BCCR), the banks' average rates rose from 7.83% to 8.39% in a matter of a week", reported Elfinancierocr.com
In Costa Rica, investments in local currency (colones) of up to six months can be found with rates ranging from 6.3% to 10.5%, where the minimum is between 25,000 to 1 million colones ($ 50 - $2,000)
In Costa Rica there is a wide range of investment options for 6 months terms.
Digital titles, capitalized interest and diversity of issuers are some of the characteristics of the term certificates market in the country.
The central bank has lowered interest rates paid on savings for periods longer than 270 days in the Central Direct system.
On August 24 a reduction of 0.50 percentage points was registered. This time the reduction is 0.25 percentage points on the value of the savings between 270 and 1,800 days.
The central bank has lowered the interest rates it pays on electronic savings deposits on the "Central Directo" system.
The monetary authority decided to cut rates in order to better align itself with the rates being offered on the market in recent months, which have been relatively low and stable.
The basic interest rate has risen in response to increased demand for liquidity from banks.
This week the basic borrowing rate, which reflects the average deposit rates paid by banks on periods of 150 to 210 days, was adjusted upward, to 7.25%.
According to economic analysts, the increase comes at a time when banks are demanding more colones to grant loans and the Central Bank is maintaining strict control of liquidity, in order to keep inflation within the parameters established by the entity.
Despite this slight increase mainly generated by adjustments in the rates of state banks, the base rate remains stable.
The basic interest rate, which reflects the interest rates on deposits in banks, the Central Bank and treasury, in the 150 to 210 day range, will be set beginning today at 7.25%, as announced Central Bank of Costa Rica (BCCR).
Interest rates fixed for 20 years being offered by banks are increasing the demand for mortgages.
Four banks are currently promoting mortgage loans with fixed interest rates.
Credit for housing rose by almost 6% from February 2010 to February 2011, an increase which could accelerate at the end of the year because of these programs.
The difference in the interest paid by banks on deposits and loans can be as much as 22%.
Intermediation margins are a measure how a financial sector performs its mediation role and is one indicator of efficiency. Though there are various ways to calculate the figure, Costa Rica's margin is higher than in other economies.
It raised 0.25 percentage points, its first increase since August 6th.
The basic passive rate is an average of savings interest rates in colones for deposits between 150 and 210 days. It is calculated by the Central Bank.
"Interest rates paid by financial entities saw minor changes in both directions (increases an decreases) this week", reported Pablo Villalobos, from the Central Bank.
The Bank does not see a reduction in interest rates, especially in colones, while there is no decrease in inflation.
Marvin Barquero published in the Nacion website: "Given that banks have the resources to lend, the businessmen request to reduce the minimum legal deposit (percentage of public deposits that banks must keep as backup) was virtually ruled out.
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