The coronavirus has left an economic impact in several countries. For this reason, some governments are developing exceptional measures to mitigate its effects. For example, the suspension of tax and mortgage payments to lessen the economic pressure on small businesses and households.
In the United States, interest rates were reduced to almost zero and a US$700 billion stimulus program was launched in a bid to protect its economy, says Mario Miranda, director of finance at MonederoSMART.
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%.
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.
Fitch foresees returns for Nicaraguan banks, however the result will not be as good for the banking industry in Panama, Guatemala or El Salvador.
From Fitch's report "2017 Outlook: Central American and Dominican Republic Banks"
The 2017 Central American bank rating outlook is stable for 2017, reflecting slight changes in growth and financial performance, according to a new Fitch Ratings report. The evolution of some factors, such as interest rates and private investment, or the emergence of events that could increase reputation risk could alter the banking outlook.Stable Rating Outlook: The ratings of most banks in the region have a stable outlook, reflecting the fact that their credit profile will not undergo significant changes in Fitch's base scenario.Movements in the ratings will be derived mainly from adjustments in ratings of parent banks or sovereign ratings, or of unanticipated events.
While financial regulators want to increase the quality of banks' management with better qualified managers, a bill intends to reduce the demands of professionalism for a "popular" bank.
The intention of six members in reforming the Organic Law of the People's Bank (Banco Popular) and Community Development (BPCD) is to increase control of the union on the bank's management which is "...
The criticism attracted by the latest "commercial" venture by the State Bank of Costa Rica should not stick to just the surface of the fairytale castle and pink marketing campaign, but should go to the heart of the concept of state banks, which today have degenerated into simple banking institutions with commercial privileges.
EDITORIAL
This is precisely what Sebastian Hernandez does in his lucid analysis of the launch of the new brand Banca Kristal in new branches of Banco de Costa Rica, an exclusive service for women, and one which is painted pink.
Without disclosing the amount of the transaction, the Canadian bank has announced the acquisition of Citigroup's operations in personal and commercial banking in both countries.
From a statement issued by Scotiabank:
Scotiabank will acquire Citigroup's personal operations and commercial banking operations in Panama and Costa Rica
SAN JOSE, July 14, 2015 - Scotiabank announced today that it has reached an agreement to acquire Citigroup's personal and commercial banking operations in Panama and Costa Rica, subject to regulatory approval. The core category 1 capital ratio of Scotiabank will be affected by approximately 15 basis points.
Private banks operate with margins between interest rates which are considerably lower than state banks.
An article in Elfinancierocr.com points out that "the five banks with the lowest margins in the country are private ones, as is clear from a study by EF based on data reported to the Superintendent of Financial Institutions (Sugef) for December, 2012 ".
From October last year to date, public banks in Costa Rica cut their average rate by almost 4.5%.
"In the last four months state banks made a sharp rate cut to place them below the average of other intermediaries and brush with near-zero real returns", reported Nacion.com.
"The banks reduced their rates so that they are now the lowest among the sector and real returns are close to zero.
Data for January 2013 shows that the arrears in loans in the three state banks in Costa Rica are close to the maximum allowable limit.
For the Banco de Costa Rica, the arrears indicator has reached 3.14%, exceeding the ceiling imposed by the Superintendent of Financial Institutions (Sugef), of 3%.
Nacion.com reports that "The delinquency indicator of the three state banks, together, came to 3.02% last month, up from the 3% allowed by Sugef.
Managers of large Costa Rican public institutions are coordinating actions with government officials and state banks.
According to an article in Elfinancierocr.com, the meeting held on Monday 14 January is part of a consultation strategy that President Chinchilla is conducting in order to find the best way to control speculative capital inflows.
Alfredo Volio, chairman of the board of Banco Nacional, said: "The idea is to seek a reduction in interest rates, integrating the entire public sector for us to coordinate efforts."
The presidents of Costa Rican state banks said they "do not know why they are paying higher fees" than those paid by private banks.
EDITORIAL
The phenomenon of the nerve with which too many Latin American officials are flaunting their irresponsibility is increasing.
Television pictures showed a formal meeting chaired by the Chief Executive of Costa Rica, President Chinchilla, accompanied by her Vice-Minister of Finance, Central Bank President and other members of the economic team, and presidents and directors of the three main public banks in the country, the Banco Nacional, Banco de Costa Rica and Banco Popular.
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.
While Costa Rica’s state-owned banks are hiring more employees, those in the private sector cut back their workforce in first five months of 2010.
State-owned Banco Nacional and Banco de Costa Rica stated that the increase comprises temporary positions for vacation and sickness cover, in addition to some short-term contracts for specific projects.
In the first quarter of 2009 state bank profits fell by 25% when compared to the same period in 2008.
According to the Superintendent of Financial Institutions (SUGEF), the opposite happened with private banks, which increased their profits by 12% over the same period.
Patricia Leitón reported statements by Guillermo Quesada, Bancrédito manager, in her article in Nacion.com: "The results for state banks were influenced by an increase in administrative costs, particularly due to increased spending on staff. In state banks, real spending on personnel rose by 4.7% during this period and it fell by 5.4% in private banks."