COSTA RICA Law and Practice Contributed by: Douglas Soto, Miguel Elizondo-Soto and Osvaldo Madrigal Méndez, Zurcher, Odio & Raven
The Fund receives contributions from the regu - lated entities. The maximum contribution to the Fund is 0.15% of the total financial intermedia - tion liabilities covered. Within this maximum, a risk-based premium, established by regulation, will be applied based on the risk profile of the financial entity. In addition, the Fund will be guaranteed by the assets constituting the mini - mum reserve requirement (RR) and the liquidity reserve (LR), up to 2% of the total liabilities sub - ject to those requirements. According to Law No 9816 the Fund will pay by an order of CONASSIF, upon a recommenda - tion of the intervention manager of the entity in default. If a default event occurs that triggers the pay-out, where CONASSIF determines that it is necessary to use the Fund, resources will be used from the compartment of the Fund to which the financial institution contributes. If the Fund is insufficient, the amounts will be met by the RR and LR guarantee. The Regulation indicates that OGF corresponds to any guarantee fund, existing or created in the future, different from the Fund, which must offer equal or greater coverage than provided by the Fund, and it must be regulated by CONASSIF and supervised by SUGEF. Savings and credit unions are the only entities authorised to con - tribute to OGF. 7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements According to Articles 62, 63 and 65 of Law No 7558, all supervised financial institutions must maintain a reserve requirement for deposits and funds received, with a maximum limit of 15%, in an unremunerated BCCR account. This minimum
reserve requirement has been set by the BCCR at its maximum level since August 2005. Short- term external debt operations and new opera - tions of medium and long-term external debt were included as part of the reserve requirement in September 2011 and July 2015, respectively. There is no differentiation between instruments or institutions. Although this requirement does not apply to co-operatives, a minimum liquid - ity reserve of 15% is applied to a group of co- operatives based on their size. These reserves must be invested in financial instruments issued by the BCCR. The capital adequacy of financial institutions operating in Costa Rica is prescribed by Regu - lation SUGEF 3-06 (Regulation on the Capital Adequacy of Financial Entities) and Regulation SUGEF 24-22 (Regulation to Assess the Eco - nomic and Financial Situation of the Supervised Entities). Regulation SUGEF 3-06 defines a minimum capital requirement of 10% for all financial insti - tutions (banks, savings and credit co-opera - tives) operating in Costa Rica, and describes the methodology to estimate the solvency of supervised entities. Reserves created with spe - cific purposes, other than loss absorption, are not accepted for the calculation of solvency. Capital is required for credit risk, operational risk, exchange rate risk, counterparty risk and market risk in transactions with exchange rate derivatives and risk of changes in interest rates on operations with exchange rate derivatives. Financial institutions are rated and categorised by risk level based on their capital adequacy lev - els, according to Regulation SUGEF 3-06 and SUGEF 24-22. The same regulations prescribe the remedial action and measures required at each of the different risk levels.
124 CHAMBERS.COM
Powered by FlippingBook