A major difference in banking at a state bank vs. a private bank is safety. All banks are regulated a government agency that establishes minimum capital and liquidity requirements and monitors lending practices. The regulatory agency is often short staffed. If, and when, they discover problems in a bank the situation is usually beyond the point of being corrected and the result is the closing of the bank.

Deposits in the state banks are backed-up by the full faith, credit and assets of the Costa Rican government so your savings account, checking account or certificate of deposit would be reasonably well protected in the highly unlikely event that a state bank were to close. In effect, the Costa Rican government cannot afford to have anyone loose money due to the failure of a state bank as it would undermine the entire economic system of the country.

Conversely, the obligations of private banks are backed-up only by the assets and banking practices of the bank. The government of Costa Rica takes no responsibility for any loss suffered if a private bank is closed.

Should all of the private banks be closed, leaving us with only the option of doing business with the state banks? No! The private banks provide needed services for their clients and the majority of private banks are operated in a professional and honest manner.

Should the private banks be required to provide insurance to protect their depositors if the bank were to close? Yes!

A bank deposit insurance program should be established in Costa Rica and participation made a licensing and operating requirement for every private bank. This insurance program could be established and administered by the government agency that regulates banks or it could be operated by INS, the national insurance company.

Who would pay for this insurance program? The obvious answer is the private banks would pay insurance premiums based on their deposits. This cost would be passed through, indirectly, to the bank’s depositors. The impact (cost) to the bank’s customers would be negligible because the premium amount paid by the bank would be very small because the fund would cover all the private banks.

The result? We could continue to use the facilities of the private banks with the confidence that our deposits are insured for our protection.

Most of the people reading this article are foreign residents of Costa Rica and we have little or no political influence or input. However, we do have the ability to talk to officers at our bank. We each have the ability to insist that our bank provide some form of insurance to protect our deposits. If enough people tell enough private banks that we want this type of protection, the banks will recognize there is a need and they will move to fulfill this need.