Thursday 19 May 2022

Sugef relaxes bank reserves to boost credit

Relaxed bank reserves expected to boost credit and reactive a stagnant economy

Paying the bills

Latest

Jill Biden visits Costa Rica this weekend

QCOSTARICA - The first lady of the United States,...

Rodrigo Chaves and journalists clash for the truth. Who is lying?

QCOSTARICA - In the second week of the new...

Gasoline would drop by ¢28 and diesel by ¢43 due to changes in Aresep’s methodology

QCOSTARICA - As the headline reads, we are in...

President: If the extension of ruta 27 is in the contract “we will enforce it”

QCOSTARICA - What will happen to the expansion of...

If Latin America has a commercial capital, it is Miami

Q REPORTS (Economist) For Joan Didion, an American essayist,...

Pilar Cisneros: “The government should be totally open to the press”

QCOSTARICA - The press must have access to public...

Arrival of tourists from the U.S. and Europe recovers

QCOSTARICA - Costa Rica registered for April 2022 the...

Dollar Exchange

¢670.23 Buy

¢675.98 small> Sell

19 May 2022 - At The Banks - BCCR

Paying the bills

Share

The Superintendencia General de Entidades Financieras (Sugef) – General Superintendency of Financial Institutions – relaxed the rule that requires financial institutions to create reserves to protect themselves in case of deterioration of their loans.

Relaxed bank reserves expected to boost credit and reactive a stagnant economy

The decision was made to “free” resources to financial institutions for the placement of loans at a time when the economy is slowing, confirmed Bernardo Alfaro, head of the Sugef.

As of this year, the Superintendency reduced from 5% to 2.5% the percentage of the projected annual profit that the banks must allocate to the formation of the so-called “countercyclical” estimates, as detailed in the official bulleting SGF-0077-2019 of January 19.

- Advertisement -

Each financial institution, based on its earnings projections, must save the portion dictated by the Sugef regulations.

This special reserve began to accumulate in 2016. At the end of 2018, it amounted to ¢71.7 billion colones, according to the data of Sugef.

The objective of this cyclical estimate is to accumulate resources, in times of economic growth, and to protect financial institutions when credit portfolios deteriorate.

Deceleration

Alfaro explained that the decision to reduce the percentage of mandatory estimation was agreed after analyzing the trend of the Índice de Auges Económicos (Economic Booms Index).

This is an internal indicator of the Sugef that measures the growth of credit granted by financial entities with operations in the country.

“There is no acceleration in credit (…) the tool (the provision) is countercyclical, and not pro-cyclical. If it continues, it would increase the problem of low credit expansion,” stressed the Superintendent.

- Advertisement -

Data from the Banco Central (Central Bank) shows that the growth of credit in the private sector stagnated as of November of last year.

The year-on-year change rate remained at 6% from November 2018 to February 2019.

Alfaro said the Sugef will conduct a review of the regulatory change in June. At that time, it will be determined if the percentage of the countercyclical reserve is further reduced, maintained or raised.

For María Isabel Cortés, executive director of the Costa Rican Banking Association (ABC), the Costa Rican economy needs to be reactivated, which is why the decision of the Sugef was necessary.

- Advertisement -

Annabelle Ortega, executive director of the Cámara de Bancos (Chamber of Banks), considered the Sugef decision a positive one given the current economic cycle.

 

- Advertisement -
Paying the bills
Q Costa Rica
Reports by QCR staff

Related Articles

The decisions Rodrigo Chaves made on his first day of work

QCOSTARICA - In his first government council (cabinet meeting) following his...

Changes in the way of calculating fuel prices does not guarantee reductions

QCOSTARICA - On Thursday, the most recent increase - the fifth...

Subscribe to our stories

To be updated with all the latest news, offers and special announcements.