Bancredito To Close As A Retail Bank

Government decided to cut its losses, says debtors must continue to pay their loands

The Bancredito wil cease operating as a commercial bank by the end of the year. In the phot the Bancredito San Jose corporate offices.

As State banks go, Bancredito was not the top choice for Costa Ricans, even less for foreigners in Costa Rica, which for the longest time, the only interaction they had with the bank and unbeknownst to them, was to pay the airport tax as they left the country.

Add to that a series of bad loans and the financial problems at the bank were going from bad to worse. So, it was no surprise the announcement by Casa Presidencial that the Banco Crédito Agrícola de Cartago would no longer be.

So, it was no surprise the announcement by Casa Presidencial (Government House) that the Banco Crédito Agrícola de Cartago would no longer be continuing as a retail bank.

In the last couple of days few people can be seen in Bancredito brances

On Thursday, at the weekly Cabinet meeting (Consejo de Gobierno in Spanish), the decision was made to shut down the bank’s retail or commercial operation. The decision was confirmed by Sergio Alfaro, Minister of the Presidency.

“The bank will not close, it will continue to operate. People who owe money have to continue paying their loans and depositors can have total peace of mind that Bancredito will pay on time,” said Alfaro.

What the words of the minister mean is that the Bancredito, before the end of this year, will stop taking deposits and issue credit (loans), but will be to continue its work as a state bank maintaining its operations related to trusts, tax collection and administration of the stores of the Mixed Institute of Social Assistance (IMAS) – the state agency that operates the duty-free shops at the airports, among others and technological and logistical services to other public and private institutions, as well as other businesses.

Borrowers are expected to repay their loans, depositors will be able to withdraw, according to the government statement

What happened?
A number of failed loans may have done in the bank. One of the loans was to retail chain Casa Blanca that is currently in the judicial process (receivership), that resulted in the bank reporting in January of this year a loss of ¢591.6 million colones.

Up to April, the bank reported total assets of ¢755.1 billion colones and liabilities of ¢686.8 billion, this according to the report by the Superintendency of Financial Institutions (Sugef).

Pictured is the IMAS Duty Free shop at the Juan Santamaria (San Jose) airport that the Bancredito will continue to manage, in addition to the collection of the airport and exit tax.

However, in March, it was about to fall into ‘financial irregularity’ with banking authorities but signed a last-minute deal with the Banco Nacional (also a State bank) for an advance of ¢2 billion colones on the collection of the exit tax. (Editor’s note:  Although the exit or airport tax is no longer paid directly by the passenger, the airlines collect it and remit. The exit tax at land borders is still paid directly to the Bancredito.)

The difficulties led the institution to face a reduction in funding that was solved by the Ministry of Finance (Ministerio de Hacienda) injection ¢118 billion colones. Subsequently, the Bank of Costa Rica (BCR) – another State bank – on May 17 to withdraw ¢71 billion colones invested in Bancrédito due to the lack of a financial rescue plan.

“The decisions are justified by the fact that maintaining the commercial area of the bank would require an enormous effort on the part of the Government in budgetary matters while acknowledging the potential and capacity of the bank to continue functioning as an institution for development,” said Alfaro.

The Bancredito has a 99-year history. By its 100th it will stop being a commercial (retail bank). Photo of the Bancredito booth at a financial exposition.

Bancredito was founded in June 1918 and opened its doors to the public on September 16 of the same year.

Up to April, the bank reported having 736 employees and 35 branches across the country.

As to employees, the Minister assures there will be a “gradual labor mobility” as necessary, accompanied with placing employees in new jobs.