(QCOSTARICA) The Superintendencia de Entidades Financieras (SUGEF) and Consejo Nacional de Supervisión del Sistema Financiero (Conassif) will eliminate requirements and relax conditions to boost the loan fund of ¢900 billion colones that the Government announced last week (May 8), as the main bet for economic revival.
The announcement of these new conditions by the Superintendency of Financial Institutions, the Supervision of the Financial System and state banks are to be made official on Friday, said the Minister of Planning (Mideplan), Pilar Garrido, in an interview on Telenoticias on Wednesday.
“The only way to be able to reopen businesses by people who do not have enough savings or working capital at the moment, is to have someone give you very cheap credit that you pay in a year and a half or two, with symbolic payments (in between), at a preferential rate and dose affect your credit record,” said Garrido.
The minister explained in detail the changes are endorsed by the SUGEF, Conassif and state banks, the Banco Nacional de Costa Rica (BNCR), Banco de Costa Rica (BCR) and the Banco Popular y de Desarrollo Comunal (Popular), although the conditions of the loan fully remain with each financial institution
According to the minister, banks will have the autonomy to make the decision not to participate, “but that is not the world I have had from the managers, they are absolutely willing to assume the whole set of rules and to help in this crisis unprecedented for the country and which requires extraordinary measures to be taken”.
The minister added that she is already in talks with private banks to join the initiative.
These modifications also include the creation of a fund to serve as a guarantee for banks. It is an injection of ¢200 billion colones from the Banca para el Desarrollo ( Development Bank) with the National Development Fund (FONADE) as a guarantor to the banks.
These are the more important changes to be announced this Friday:
Credit record: the credit evaluation that each bank makes of the applicant will be with the record from last December or the first quarter of this year (whichever is better) so that it does not reflect the effects of the COVID-19 pandemic.
Reduction of rates: each bank will be able to reduce its interest rates below floor rates, according to its own evaluation of each case and supported by the support and security that will be endorsed by FONADE.
Credit guarantee: the National Development Fund will provide the guarantees to cover the credit portfolios of the state banking entities, according to the particularities of each sector. Thus, for example, the tourism sector (hotels, restaurants and the rest of the chain) will have its own guarantee fund so that borrowers who do not have guarantors are not excluded from the possibility of a loan.
Moratorium on payments: each company or person that takes out a loan with this special fund will have a grace period of up to two years in the repayment of installments. The only requirement will be to make a “symbolic” payment at least every 180 days.
Another aspect of the loans is the repayment can be in relation to billing, that the repayment is based on billing or income received and not a fixed payment.
“That is why this measure is robust, beneficial and can change the face of the productive sector,” added Garrido.
Where is the money coming from?
The minister assured that the ¢900 billion colones will come entirely from the capital of the state banks and that the government did not inject fresh resources into the coffers of state banks for new loans to the productive sector.
“The state bank has resources to lend, according to the budget of each entity,” assures the minister.
“What the Government did was to make a call, in this case to the state banks, to find out how many resources they had available to lend to the productive sector and that is the amount that was presented to the population at a press conference,” said Garrido.
“They are not fresh resources, it is about the resources that the banks have already budgeted for different economic activities and it depends on the demand for credit, the banks would handle budget transfers from different activities to others,” said Douglas Soto, manager of the BCR.
Soto explained that the bank will shift around loan resources, for example, if the big business sector demand is low, more funds will be made available to the small and micro business sector.