The Banco Central de Costa Rica (BCCR) – Central Bank – announced on Monday a reduction in the legal minimum reserve for banks in order to stimulate the loans in colones in the country.

Banco Central de Costa Rica (BCCR) or Central Bank

The decision will reduce from 15% to 12% the percentage that banks should save on deposit with the Central Bank, this will mean more money will be available for the granting of loans and the possibility of an improvement in interest rates.

The measure will be applied as of June 16 and will be applied only for deposits in colones (national currency).

“The measure adopted could stimulate credit conditions, given the situation in which the pace of economic activity has slowed, the level of production is below its potential, the unemployment rate is high and credit to the private sector has slowed down markedly,” explained Rodrigo Cubero, president of the Central Bank.

The Central Bank estimates that the decision would release some ₡381 billion colones that could be used in loans.

In the case of dollar deposits, the reserve will remain at 15%. As explained by Cubero, this is to help discourage loans in dollars.

“Without a doubt, the measures taken by the Central Bank will have a positive effect: more available resources and lower interest rates; however, the most important thing is the recovery of people’s confidence that the economy will improve and signals such as those sent by the Central reinforce this process,” said María Isabel Cortés, executive director of the Costa Rican Banking Association.

This is the first time the minimum legal reserve was reduced since 2002.