Costa Rica : Financial Sector Assessment
This Financial Sector Assessment (FSA) summarizes the joint International Monetary Fund-World Bank Financial Sector Assessment Program (FSAP) report for Costa Rica, completed in August 2002, whose diagnosis and assessment, are based on information...
| Main Author: | |
|---|---|
| Language: | English en_US |
| Published: |
Washington, DC
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2338099/costa-rica-financial-sector-assessment http://hdl.handle.net/10986/14348 |
| Summary: | This Financial Sector Assessment (FSA)
summarizes the joint International Monetary Fund-World Bank
Financial Sector Assessment Program (FSAP) report for Costa
Rica, completed in August 2002, whose diagnosis and
assessment, are based on information available as of
end-2001. Costa Rica has a record of substantial output
growth, with low macroeconomic volatility, but short term
prospects remain uncertain. Thus, this stable macroeconomic
environment masks some sources of tension, not least in
respect of public sector debt, but also regarding the
external accounts. Furthermore, the fiscal deficit widened
during the l980s and 1990s, reflecting depressed tax
revenues, and significant increases in pension expenditures.
In contrast, the monetary and exchange rate regime that
promotes dollarization, limits the scope for relative price
adjustments, revealing an exchange rate that seeks to
preserve external competitiveness, subject to the constraint
of ensuring credibility of the crawling peg. Recommendations
are set in light of the following considerations: leveling
the playing field between public and private banks appears
to be a key strategic priority. Therefore, regarding
prudential oversight, most urgent are reforms to establish
consolidated supervision of financial conglomerates, and
strengthen the supervision of onshore banks, which would
strengthen prudential oversight, limiting the financial
system's exposure to systemic risk, particularly if the
current monetary regime is maintained. With respect to the
financial system safety net, it is essential that the
planned introduction of a (limited) deposit insurance scheme
be accompanied by strengthened supervision, and the
establishment of a bank failure resolution framework.
Reforms should ensure viable pension systems, and improve
the functioning of securities, pensions, and insurance markets. |
|---|