COUNTRY PROFILE
Total land area:............... 50,100 sq. km.
Official language:............ Spanish
Administrative divisions:.. Seven provinces
Legal system:................. Based on Spanish civil law; judicial review of legislative acts
in the Supreme Court.
Executive branch:........... Chief of state and head of government‹president, first and
second vice president elected for four year terms for universal
suffrage.
Legislative branch:.......... Unicameral Legislative Assembly (61 seats).
Judicial branch:............... Supreme Court, justices are elected for eight-year terms by
the Legislative Assembly
ECONOMIC PROFILE
Currency: Costa Rican colón (C)
GDP: US$7.5 billion (1997)
Real GDP growth (at market prices; mining and quarrying included in manufacturing): 3.2 (1997p)
GDP (average annual growth rate): 3.8 (1988-1997)
GDP per capita (1990 US$): 2,098.1 (1997)
Consumer price index (average annual growth rate): 13.2 (1997)
Nonfinancial public sector fiscal balance (% of current GDP): -1.4 (1997)
Money supply (M1) (% of current GDP): 7.9 (1997)
Interest rate (average rate offered by state-owned commercial banks on time deposits
of one month): 17.0 (1997p)
Current account balance: -US$0.4 billion (1997)
Trade balance: -US$0.7 billion (1997)
Main exports: Manufactures, bananas, coffee, nontraditional agroexports, processed food.
Main imports: Raw materials, consumer goods, capital goods, fuel and lubricants, construction materials.
Nominal exchange rate (C/US$) end of period: 244.3 (1997)
Real effective exchange rate (Index 1990=100): 110.0 (1997)
BANKING INSTITUTIONS
I. Banking Supervision
1. The principal supervisory body is the Superintendencia General de Entidades
Financieras (SUGEF).
2. SUGEF is an autonomous government agency within the Central Bank
(Banco Central de Costa Rica).
3. It reports to the National Council of Financial System Supervision.
4. SUGEF supervises banking institutions permanently off-site. On-site examinations
take place at least twice a year, although they can be performed more often as needed.
5. Examined banks are rated under one of the following categories: normal risk, unstable
level 1, unstable level 2, unstable level 3.
Normal risk Unstable 1 Unstable 2 Unstable 3 Sufficient equity >=10.0% but <10.0%
>=8.0% but <8.0% >=5.5% < 5.5% Committed equity <=5.0% but>5.0% <=20.0% but >20% <=35.0% >35%
Debt Level
<9.0 times but>9 times <=12 times but >12 times <=18 times >18% Late > 90 days/ direct portfolio
<=3.0% <= 10.0% but>3.0% <=20.0% but>10.0% >20.0% Expected total asset loss <=1.0% <=7.0% but>1.0% 20.0% but 7.0%
>20.0 A+B portfolio >=95% >=90% >=80% but<95.0%
<20.0% but<90.0% Intermediation of productive asset/Interest-bearing liabilities
>=1 time >=9% times but < 1.0 times >=0.8 times but <0.9 times >=0.8 times Administrative cost average productive assets <= 5.8% <10.0% but >5.0% <=15.0% but >10.0% >15.0% Foreign currency assets/foreign currency liabilities >1% >4% but <1% >=7% but <4% <7% Net profit/equity >=TBP <IPPI <0 but >=0 <IPPI but >IPPI Net profit/productive assets >=IPPI)/6 <(IPPI/6) but >=0% <0 but >=(IPPI/3) <(IPPI/5) Operational net administrative expenses >=[(IPPI/6) = <[(IPPI/6) <1 but >=[(IPPI/5) 15%]/15% <=[(IPPI/5)/ 15%/15% Cash flow 2 month projection >=1.00 times <1.0 times but >=.86% <0.85 times but >=0.70 times < 0.70 times 2 month hedge operations
>=0.92 times <0.92 times <0.75 times <0.60 times 3 month hedge operations times >=0.85 times <0.25 times but >=70 times <0.70 times but>=0.50 times <0.50 times 6. In evaluating banks, a system similar to CAMEL is used. This system is called SUGEF, for Suficiencia Patrimonial (Sufficient Equity), Utilidades (Earnings), Gestión (Management), Evaluación de la Calidad de Activos (Asset Quality Evaluation), and Flujo de Fondos (Cash Flow).
II. Consolidated Supervision
1. Costa Rica can only supervise offshore entities when they belong to domestic holding companies
previously registered with SUGEF.
2. Consent is not required from Costa Rica to open an office of a domestic bank abroad.
3. All banking entities doing business in Costa Rica must be registered with SUGEF, which authorizes the
opening or closing of banking offices. SUGEF is not able to supervise foreign entities of which Costa
Rican banks are shareholders.
4. Offices of Costa Rican banks abroad must present audited reports to SUGEF.III. Interest Rates
1. The market determines interest rates on loans.
2. The market determines interest rates on deposits.IV. Deposit Insurance
1. A deposit insurance program insures only state banks.
2. The Law of the Modernization of the Financial System of the Republic, Number
7107, published in La Gaceta 222 on November 22, 1988, establishes that the
National Institute of Insurance will create and administer insurance to protect
investors in the private financial sector to cover investments for a sum of up to
one million colones. The institute will adjust this amount annually to conform
with the index of prices published by the Ministry of the Economy, Industry
and Commerce. Although a commission was named to study implementation,
there is no agreement with respect to the program as yet. Costa Rica also has
a private corporation which regulates a private fund. This corporation is made
up of many private banks and cooperatives that provide deposit insurance in
accordance with the percentage of deposits that the entity has. These funds are
distributed to investors when the entity itself cannot do so, maintain the bank
temporarily solvent or with the liquidity needed, and rediscount the bank¹s protected portfolio.V. Trade Finance
1. Trade finance includes the financing of import and export operations. This definition
includes letters of credit, among other trade vehicles.
2. Banking entities bear the risk of trade finance vehicles.
3. In cases of liquidation, trade finance vehicles receive the same treatment as domestic operations.
4. There are no special provisions or reserve requirements for the treatment of trade finance.VI. Capital Adequacy
1. The minimum capital required to open a bank is 1.25 billion colones.
2. The minimum capital required to maintain a bank in operation is 1.25 billion colones.VII. Asset Quality
1. The loan portfolio classification is as follows:Category % of Reserves
A Normal risk 0.5
B Temporary problems 1.0
C High risk 20.0
D Expected losses 60
E Doubtful recovery 100
OREO (more than 2 years) 1002. Minimum reserve requirements on bank assets are 1.5% of the total loan portfolio.
Reserves are calculated as a percentage of the total portfolio.
3. The legal lending limit per client is 20% of capital and reserves. For corporations
or conglomerates affiliated with the bank, less than 80% of equity.
4. Investment portfolios need not be classified according to criteria such as
hold-to-maturity portfolio, available-for-sale portfolio or trade portfolio.
5. Investments are classified either as temporary (less than 180 days) or permanent
(more than 180 days. The following are permanent investments: those in the Central
Bank, public investments and securities, deposits and investments in domestic
financial entities, repurchase agreements by foreign banks and financial entities, and other investments
and securities.
6. The following accounts are within the profit and loss statement: financial income for
temporary investments, financial income for permanent investment, expenses for
devaluation of the investment portfolio.VIII. Liabilities
1. Costa Rica has the following reserve requirements:Local currency: Until September 3, 1998 15%
Until October 1, 1998 14%
Until January 1, 1999 13%
Until April 1, 1999 12%
Until July 1, 1999 11%
Until October 1, 1999 10%
Foreign currency: After May 1, 1998 5%2. Demand and time deposits can be offered in both local and foreign currency.
3. Currently there is no limit on deposits. However, the Board of Directors of the
Central Bank can establish limits on the growth percentages of the investment
portfolios of institutions supervised by SUGEF.
4. Currently, there is no limit on the level of concentration of deposits, but the Central
Bank has the ability to determine such limits.