Late loans granted by public banks to small companies amounted to 5.5% in May, 3.8% in the case of medium-size companies and 3.3% in the case of large companies, a situation attributed to the economic slowdown.
The percentage of credits reported by the General Superintendence of Financial Entities (Sugef), refers to loans that went into default for more than 90 days and judicial collection, granted by public entities such as the National Bank, Banco de Costa Rica and Banco Popular.
With the aim of making the classification of debtors more flexible and reducing the risk of non-payment, in a context where delinquent loans keep on rising, Costa Rica authorized the modification of two regulations that apply to entities in the financial system.
The General Superintendence of Financial Entities (Sugef) and the National Council of Supervision of the Financial System (Conassif), informed that changes were made to the "Regulation for the qualification of debtors" and the "Regulation on management and evaluation of credit risk for the development banking system", which ultimately aim to give access to new credits to about 63 thousand people.
Between May and September 2018, an increase was reported in the proportion of loans with payment arrears greater than 90 days, but between October and December the trend was downwards.
Data from the General Superintendence of Financial Entities (Sugef) indicate that between September and December 2018, the proportion of loans with payment arrears greater than 90 days, or in judicial collection, decreased from 2.58% to 2.14%.
Because of the slowdown in the issuance of loans, in 2018 the profits of banks in Costa Rica grew just 3% over what was recorded in 2017.
Figures from the Central Bank of Costa Rica show the deceleration reported in loans granted during the first nine months of last year, detailing that up to December 2017 the credit portfolio to the private sector registered an 8% year-on-year increase, while the indicator concerned up to September 2018 dropped to 5%.
From July 2017 to September 2018, the percentage of loans in dollars with payment arrears over 90 days or in legal collection increased from 1.57% to 2.95%.
The default on dollar loans is still under 3%, which is still considered normal. However, according to the trend reported in recent months in the records of the General Superintendence of Financial Entities (Sugef), the indicator is likely to exceed the 3% barrier.
The deterioration of the economy and rising unemployment are the main reasons behind the difficulties faced by companies and individuals in Costa Rica in paying back their bank loans.
According to figures from the General Superintendence of Financial Entities, between January 2017 and July 2018, the percentage of loans in defaults for more than 90 days or in judicial collection, went from 1.65% to 2.51%, showing an upward trend in recent months.
By requiring banks to have additional capital requirements the Sugef aims to discourage consumer loans, mortgages and vehicles loans with long repayment terms.
Arguing that terms of over 30 years for housing loans and more than 5 in consumer loans encourages overindebtedness of Costa Ricans, the Superintendent of Financial Institutions (SUGEF) has presented a proposal toreform the ruleson capital adequacy of financial entities, in order to require entities that carry out these credit operations to have additional capital.
With the proposed reform to Law 8204, all electronic transfers of $1,000 or more will have to be justified by customers and registered by banks.
Article 19a of the regulation under consultation indicates that "...The subjects under obligation who provide transfer services to or from other countries in local or foreign currency, which equal or exceed US $1,000.00 (one thousand dollars in the currency of the United States of America) or its equivalent in colones or other foreign currency, must electronically record the information listed below:
Up to December 2015 28% of the total banking portfolio was destined for consumption activities, 26% to the construction sector and 16% to service activities.
Financial Monitoring figures compiled by the Commercial Intelligence unit at CentralAmericaData com show that credit unions are the institutions who awarded the most loans of this type, with 29.8% of their total portfolio.
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.
Tighter analysis of customers and better control of risk in lending are part of the changes that are being prepared by the financial regulator.
In 2013 the General Superintendence of Financial Entities (Sugef) began a process of regulatory changes for banks to continue during 2014. Tighter analysis of customers and better control of risk when granting loans are some of the changes being contemplated.
The financial company Desyfin has received $10.5 million from a Norwegian investment fund and has made a request to become a bank next year.
Recently the financial firm revealed that it signed an agreement for $6 million in a share issue with which it will have an investment reaching $10.5 million from the Norwegian Investment Fund for Developing Countries (Norfund). With this, the company is on track to become a bank.
Sugef has increased controls on transfers exceeding $10,000, as a measure of preventing money laundering and terrorist financing.
The Superintendent of Financial Institutions (Sugef) now has new regulations on money laundering which had been under consultation since September 10th with banks, mutuals, cooperatives, financial, insurance, stock positions and pension operators.
In Costa Rica, the HSBC bank will disappear as a brand and it will be replaced by that of its new Colombian owner.
In a statement to its customers, HSBC Costa Rica reported that it has already completed approvals and formalities for the transfer of shares of the companies comprising the Grupo Financiero HSBC to Banco Davivienda from Colombia.
In addition, the institution explained that it will proceed with a name change and current labeling, across all customer service channels, including offices, ATMs and its website, but it has not specified the date of the change.
The government of Costa Rica is promoting a legal reform that would transfer the cost of financial supervision to banking institutions, insurance companies and pension operators.
The legal amendment was included in the Bill for the Efficient Management of Public Finances already sent to the Legislature.
So far, "the Central Bank is funding 80% of the operation of the Superintendent of Financial Institutions (Sugef), the Superintendent of Securities (Sugeval), the Superintendent of Pensions (Supen) and the Superintendent of Insurance (SUGESE)," reported Nacion.com.