After a warning by President Chinchilla to state commercial banks, the financial entities involved have put their interest rates on a diet.
The passive base rate, an index calculated by the Central Bank of Costa Rica (BCCR), is a weighted average of the interest rates in colones on gross savings, negotiated by financial intermediaries resident in the country and the interest rates of collection instruments of the Central Bank and Ministry of Finance negotiated both in the primary and secondary market, each corresponding to periods of between 150 and 210 days.
The indicator is at its highest value so far 2012 (10.5%).
"The increase occurred despite the fact that on 23 August, the Legislature passed a law, on its second debate, to raise funds for Costa Rica using foreign debt (Eurobonds). This was expected to reduce local interest rates", writes Sergio Morales for Financierocr.om
The basic passive rate is calculated every Wednesday by the Central Bank of Costa Rica
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.
These periods are the most popular, which is why the government is trying to capture more in this segment, putting pressure on state banks who are also looking for resources in colons because they make the most loans in this currency, while the private banks are largely removed from that segment, said Luis Carlos Mora, chief financial officer of Banco Nacional.
The basic passive rate, the main interest rate indicator, has experienced far too much volatility during 2010.
This rate recently dropped 50 basis points (0.5%) to 7.25%, emphasizing its excessive volatility through 2010.
In its most recent report on price increases, the Central Bank of Costa Rica noted that these changes are caused by large transactions executed by some banks with state entities under preferential rates.
Fitch Ratings reported that the risks to regional banks during the current crisis are growing and represent a major challenge for 2009.
The combination of reduced credit expansion, fund restrictions and increasing loan provisions have limited the profits of most banks and it is expected for these factors to continue to pressure the results in the coming months.
Fitch Ratings reported that the risks to regional banks during the current crisis are growing and represent a major challenge for 2009.
The combination of reduced credit expansion, fund restrictions and increasing loan provisions have limited the profits of most banks and it is expected for these factors to continue to pressure the results in the coming months.
In January, banks charged 13.16% to loan money and now they charge 14.85%, while what they pay for deposits was reduced from 4.75% to 4.38%.
The weighted average interest rate which the banking system charges for loans in national currency, were at 14.85% at the end of September, according to the Superintendence of Banks (SIB). This represents an increase of 1.69 percentage points when compared to the amount recorded in January, when it was at 13.16%