Costa Rica - Banking and securities

The Central Bank (Banco Central de Costa Rica), an autonomous governmental body established in 1950, issues currency, holds the nation's gold reserves, formulates general banking policy, and regulates commercial banks. Three commercial state banks, which dominate the banking system, are operated as autonomous government corporations: the Banco Nacional de Costa Rica, Banco de Costa Rica, and Banco Crédito Agrícola de Cartago. The banking monopoly was surrendered in 1995. There are also nearly 70 private banks and financial groups operating in Costa Rica. Total bank assets at the end of 2000 were approximately $7.1 billion, of which the three public banks held $4 billion. The top three private commercial banks had assets between $185 to $220 million.

Monetary variables reflect the cautious monetary policy followed by the Central Bank. However, a slight relaxation of stringency took place after 1995 in an effort to counter the recessionary trend in the economy. Year-end inflation fell from 22.6% in 1995, to 13.9% in 1996, and 11.7% in 1998. The Central Bank's basic rate, which had been rising since 1993, peaked at 33% in June 1995 before falling to a low of 21.9% in 1996. The lack of efficiency of the financial system has been the main culprit of persistently high nominal rates.

Costa Rican residents can own and deal in gold, own foreign securities and foreign currencies, maintain foreign bank balances, import and export national bank notes, and import goods from abroad, but they must repatriate export earnings. Costa Ricans traditionally put their savings into real property rather than securities, but on several occasions during the 1960s and 1970s, the government successfully floated bond issues within the country. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $2.2 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $6.1 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 28.75%.

Stock sales and foreign currency transactions are handled by the Bolsa Nacional de Valores in San José. The Superintendency of Financial Markets (SUGEVAL) is in charge of the stock exchange.