Costa Rica Government Proposes New Bill Governing Private And State-Owned Banks

Mike Godfrey, Tax-news.com, New York

27 March 2001

According to Costa Rica's local press, the government plans to introduce a new bill that will make it easier for private banks to operate in the country by allowing them to offer their services regardless of whether or not they have physically established a Costa Rican branch.

There will also be a government guarantee on all small savings balances up to ¢2.5 million (US$7,700) for private as well as state banks - currently the government only reimburses depositors' savings in state banks in the event of their collapse.

The proposal includes provisions to make life easier for the country's state banks as well. It will provide them with more flexible powers in decisions involving the hiring and firing of personnel, salary levels and purchasing equipment.

The bill, which was sent to Congress last week, will also 'de-politicize' the Costa Rican Central Bank, by removing the Finance Minister from the bank's board of directors and abolish his voting powers, although he will still be a part of the bank's decision-making processes.

Local press reports say that the majority of the banking community from both private and state-owned institutions have welcomed the proposals although Luis Liberman, general manager of the private Banco INTERFIN, has voiced his concern over the decision to eliminate the need for private banks to create a physical presence here due to the potential for new entrants to gain unfair advantage over the foreign banks that have already done so. But in response Central Bank President, Eduardo Lizano, said that any new foreign banks would be required to operate under the same guidelines as the existing foreign banks.

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