AMCostaRica©
AMCostaRica©
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Government
plan called Salvation urges public
banks to issue debt purchase loans
at low-interest rates and long
terms.
/ A.M. Costa Rica wire
services photo.
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-Published:
Wednesday, October 30, 2019-
Government clarifies a
negative report issued by
Moody's
By the A.M. Costa Rica staff
The government, through the Ministry of
Planning and Economic Policy rejected the
recent report by Moody’s which says a
credit rescue plan will cause losses to
public banks.
Moody's said in a report that the
government's plan would generate
profitability problems at the National
Bank, the Bank of Costa Rica and the
Popular Bank.
According to the report, the program of
giving more credit to people with large
debts would generate problems in the banks
because they would have to offer very
long-term loans with very low rates for
these high-risk loans.
"Long-term debt management programs would
negatively affect the quality of banks'
assets and their profitability and,
potentially, could pressure their
capital," said Moody's in its report.
In response to Moody's report, Pilar
Garrido, minister of Planning said the
credit plan for people who already have
many debts, known as the Save Plan, allows
the public banks to choose the clients who
would be granted for more credit.
"This allows financial institutions to
design a safe product," Garrido said.
According to Garrido, this program does
not mean risk on the profitability of
public banks because, the client, through
a contract, cannot get more loans for a
long time.
"The signing of this agreement, as well as
the commitment to receive financial
education, will help reduce delayed
payments and minimize the risk," said
Garrido.
Recently, the government presented the
plan called Salvation that urges public
banks to issue debt purchase loans at
low-interest rates and long terms. In
addition, banks must develop a financial
education plan for clients with credits.
According to Garrido the profits of the
banks would not have to decrease, but
rather than that, it could even increase.
The rescue plan is aimed at people with
many debts who pay high-interest rates.
In addition, the program also prohibits
people who receive loans from assuming new
debts.
According to data provided by the General
Superintendence of Financial Institutions,
known as SUGEF, on average families have
debts of about $14,632, and there are many
people who receive just $17 or $86 in
salary or pension. This is due to people's
debt levels.
As A.M. Costa Rica reported on Oct. 17th,
the government presented two bills to
increase the access to more credit for
people with high debts and low cash flow.
The minister of the Presidency, Víctor
Morales-Mora, presented two bills to the
Legislative Assembly as a response of the
government program for support on highly
indebted persons. One seeks to cop the
interest rates on credit transactions.
According to the government, the two bill
aim to facilitate the fight against the
situation of high indebtedness that
affects thousands of people, improve the
welfare of families and contribute to the
reactivation of the economy.
The two bills presented by the government
are:
- No. 21,651 Measures to Alleviate the
financial situation of people. This bill
has the goal of helping the financial
situation of the indebted people with
measures to be applied to public banks and
regulate the excessive interest rates.
- No. 21,650, Strengthening of the Credit
Information Center, known as CIC. This
bill has the goal of organizing the
information gap that currently exists
regarding the debtor's debts profile.
"Protecting the pocket of people is a
fundamental part of the priorities of the
government of President Carlos Alvarado,"
said Morales-Mora. "We will continue
talking with all the political parties to
strengthen these projects and promote
their prompt approval. We know that
indebtedness is a national problem. ”
These two bills are the result of the
government's intention to find a solution
for the high levels of debt of the people,
said the ministry in its statement.
According to the government, the two
bill's goal is to make two main changes.
The first is that public banks can
allocate a portion of the resources to
credit programs to help people with high
debts.
The second change consists in establishing
the competence to determine, in a
technical manner, the maximum rate of
credit purchases in order to fight against
the so-called usury rates.
After the approval of these bills, the
rates that are above the top limit defined
by the Central Bank will be considered
usury rates, and will qualify as a crime
to the detriment of the consumer, said the
government.
In addition, another change is to resolve
the credit information gap that currently
exists in the country by the CIC system.
This change would allow the creation of
more complete information to increase the
efficiency of the financial system in the
process to give a loan.
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Is the Save plan a positive strategy to
help people with many loans? We would like to
know your thoughts on this story. Send
your comments to: news@amcostarica.com
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