With the aim of giving Nicaraguan banks greater flexibility and enabling them to create more liquidity, the country's central bank has decided to reduce the mandatory reserves a bank must have.
While analysts questioned believe that banks are unlikely to cut their interest rates immediately, this measure will mean that banks can reduce the amount they keep in reserve with the central bank and therefore release more credit, which should help stimulate the economy.
An article by Lucia Navas for La Prensa states that, "credits with commercial banks for the private sector increased to $115 million in February, implying a 'negative net flow' of almost $32 million, taking into account the loans paid and approval of new ones".
Source: laprensa.com.ni
More on this topic
February 2011
The Central Bank announced that the daily legal reserve requirement will now be 12%, while it now stands at 16.25% weekly.
According to Antenor Rosales, president of the Bank, financial institutions must maintain a minimum reserve of 15% biweekly and a daily minimum reserve of 12%.
June 2009
According to Banks, the change in the calculation of the reserve will increase the costs of the financial intermediaries and will reduce the supply of credit.
The Central Bank of Costa Rica modified the methodology used to calculate reserves, implicating that, beginning next July 1st, Banks must have deposited in the Central Bank, at the end of each day, deposits of no less than 97.5% of the minimum legal reserves for the previous month. At the moment this calculation is done based on deposits from 5 days beforehand and it is at 90%.
April 2008
Raising the minimum legal reserve requirements for commercial banks and financiers could translate into an increase in interest rates for customers.
The increase in reserve requirements is being considered in an effort to capitalize the Central Bank and give it more power to control inflation. The Executive Branch has sent a bill that would have this effect to the Legislative Assembly.
July 2011
Having been taken to the Constitutional Court, an appeal against a measure submitted by the Chamber of Banks and Financial Institutions, has been suspended until further ruling.
The appeal was filed against the agreement by the Board of the Central Bank of Costa Rica, which states that financial intermediaries must have reserves not only for deposits and income, as mandated by the Organic Law of the BCCR, but also operations originating from short-term external loans, revolving lines of credit contracted abroad and transactions originating in foreign loans that contain provisions for enforcement of payment in a period of less than 360 days, or that do not preclude or exclude payment in that period.
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