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.
The state bank will stop performing financial intermediation activities and, despite proof of its inefficiency, will be converted into a promotion and development bank.
From a statement issued by the President of Costa Rica:
The Governing Council, meeting at a shareholders meeting at Banco Crédito Agrícola de Cartago (Bancrédito), decided to accelerate the transformation of that entity into a promotion and development bank, by executing a plan that would allow the entity to gradually cease to perform financial intermediation activities before December 31, 2017.
Bank entities estimate that in 2015 they granted, on average, between 15% and 25% more loans than in 2014.
Although a lower level of uncertainty is expected, the economic and fiscal situation is an element which concerns bankers who predict, nevertheless, growth portfolios similar to those of 2014.
Elfinancierocr.com reports that "...Bancrédito, Banco Lafise and BCT are the entities which estimated higher growth in their portfolios for 2015, but other banks expected a rise of around 15%. "
Costa Rican Commercial banks closed 2012 with net income of $360 million, which is a 30% increase in nominal terms compared to 2011.
Those who reported the highest earnings were public banks, meanwhile private banks reported the highest growth last year in 2012, closing with $111 million, 32% higher than 2011. (This amount does not including the banks results from the banks Citibank, General, Bansol and Improsa).
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 four state-owned banks intend to lend $682 million in housing in 2012, 20% less than last year.
Publicly owned banks (National, Costa Rica, Bancrédito and Popular) have set a goal of granting ¢351,000 million ($682 million) in housing loans during the course of 2012, reported Nacion.com.
This figure represents about 29% of the resources that these entities have available for loans this year (approximately ¢1.23 billion, a dollar = 515 colones), and a reduction of almost 20% compared to last year’s target of ¢437,000 million ($848 million). The reduction is due to lower expectations of placements by the National and Bancrédito banks.
A project to unify their technology platforms has proved unsuccessful, a fact that limits the possibilities of integrating their services.
Apart from the failure of the macro project, some synergies have been achieved. Between the National Bank and Bank of Costa Rica (BCR) there is an agreement that clients can change checks and make deposits and both share the use of ATMs.
State banks will allocate $670 million through different programs aimed at Small and Medium Enterprises.
According to a survey conducted by La Nacion with State owned financial institutions, the sectors most favored will be service and trade.
"For 2011 Banco Nacional has a budget of $375 million to lend to MSMEs, Banco Popular has $243 million, BCR $30 million and Bancrédito $22 million, respectively."
State banks will allocate $ 788 million through programs for all social strata.
Banco de Costa Rica (BCR), Banco Nacional and Bancrédito, have placed more than 20% of their portfolios in this area.
In the case of Banco Nacional, the institution will provide $ 535 million of which $ 347 million will be targeted for families with low and middle income.
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.
Gabriela Mayorga López in Elfinancierocr.com comments on a study from the Costa Rican Banking Association (ABC in Spanish) that indicates that in June, "Banco Promérica recorded the largest colones margin with 21.8%. It was followed by Citi with 14.3% and Banco General with 14%. Banco Popular had the highest dollar margin with 7.8%".
Reforms are planned to the "Sistema de Banca para Desarrollo" (SBD) "banking toll fee" arrangement with the introduction of a fixed payment.
In addition, the concept of differentiated regulation will be introduced and the role of Costa Rica's national learning institute (INA in Spanish) in carrying out business training will be clarified.
"The SBD began in 2008 with the creation of three funds: financing and liquidity, bonds and guarantees and business development services. Together these make up the National Development Trust (Finade in Spanish)," reports Elfinancierocr.com. "As of March 2010, this fund contained approximately $164 million while its investments were only $28 million".
A MEIC study found that credit card issuers charge interest rates between 20% and 54%.
There are 27 issuers in the country, whom collectively offer 407 different products, according to the study by the Economy, Industry and Commerce Ministry (MEIC).
The most expensive credit cards are: Compra Facil, issued by Medio Pago (54% interest rate), Vista International issued by BCT (50.4%) and Master Card issued by Citi (49.32%).
State owned banks will now be able to loan up to 20% of their equity to state entities.
With the approval of the law project, the available loan portfolio at state-owned banks will be 8.6 times larger.
"The modification increases from 6% to 20% the capital and reserves limit that state banks can loan to public institutions. ICE, AyA (Sewer and Aqueducts Institute) and CCSS (Costa Rica Social Insurance) will remain outside of this limits", reported Elfinancierocr.com.
Costa Rica Development Banking System will finance SMEs productive projects in up to $110.000.
Small and medium businesses with viable projects will be able to request financing from state owned banks "Banco Nacional", "Banco de Costa Rica", "Banco Popular" and "Banco Nacional de Costa Rica".
"The loaner can supply mortgage, pledge or fiduciary guarantee" reports Elfinanciero.co.cr.
Money is not reaching the productive system in Costa Rica because of defects in the law, for which reforms are still being studied by the Advisory Council.
The guidelines that regulate the Development Bank System contain inconsistencies that have impeded the allocation of a good part of the abundant financial resources available. Because of this, the Advisory Council will send a reform proposal to the Legislative Assembly.