Interest Rates Lowered, Banks to Increase Their Reserves
The Banco Central de Costa Rica (BCCR) - the central bank - announced changes that can reduces interest rates paid to depositors and at the same time offer depositors more security of their banking institution, forcing banks to increase their reserves to 15% for the current 12%.

As of yesterday, the "básica pasiva" - the interest rate paid on deposits was reduced to 14% from 14.5% on colones accounts. The interest rate on US Dollar accounts is not affected.

The central bank is giving banks until August of this year to increase the amount of reserves from the current 12% to 15%. Banks have to maintain that amount based on their intake and monitored by the Central Bank's superintendent.

Banks who fall below the required 15% will need to shore up their reserves or face government action.

Several private banks fell below the minimum reserves of the past couple of years and since disappeared. The latest is the case of Banco Elca, which is in the process of being liquidated.

Carlos Fernández, General Manager of the Banco de Costa Rica (BCR) says the change will mean that the BCR will need to maintain an additional ¢23 billion colones on which it will not be earning any interest. The change is expected to increase the Central Bank's reserves by us$120 million dollars.

The change will not only force the banks, both private and state, to tie up more cash, it will affect customers as well, who will receive less interest on deposit and pay more on loans. The changes in interest will be set by the banks once they adjust their reserves.