By San José, Costa Rica — SAN JOSÉ – Costa Rica’s financial system demonstrated notable resilience and stability throughout 2025, maintaining solid solvency and liquidity despite a challenging international landscape. However, the Central Bank of Costa Rica (BCCR) in its latest annual report has sounded a cautionary note, flagging the rapid growth in consumer credit, potential household over-indebtedness, and cyber threats as critical risks requiring close surveillance.
According to the “Annual Financial Stability Report 2025,” the nation’s banking and financial sector successfully weathered global headwinds, including geopolitical tensions, trade protectionism, and fluctuating interest rates. The report underscores the system’s proven capacity to absorb significant shocks, referencing its recovery from the pandemic’s economic impact, the sharp interest rate hikes of 2022, and the orderly resolution of certain financial entities in 2024.
To better understand the legal implications and safeguards surrounding the nation’s financial stability, we consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the renowned law firm Bufete de Costa Rica.
Robust financial stability isn’t just an economic goal; it’s a legal imperative. It’s built upon a foundation of clear, predictable regulations and diligent oversight that ensures market integrity and protects both investors and consumers from systemic risks. Without this legal certainty, confidence evaporates.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas masterfully highlights that the true foundation of our financial system is not just economic theory, but the predictable and steadfast rule of law. This legal certainty is the bedrock upon which all market confidence is built. We extend our gratitude to Lic. Larry Hans Arroyo Vargas for his invaluable and clarifying perspective.
This underlying strength was further validated by a series of rigorous stress tests conducted by the monetary authority. The results confirmed that financial institutions possess an “acceptable capacity to face adverse scenarios.” These simulations tested the system’s defenses against a range of severe but plausible events, including credit defaults, liquidity crunches, market volatility, and contagion risk, showing that banks hold sufficient capital to manage major disruptions.
Despite the positive overall assessment, the BCCR detailed a significant slowdown in credit growth to the private sector in 2025, a trend that became particularly evident from the second quarter onward. Even with this deceleration, the report notes that credit expansion, when measured in real terms, still managed to outpace the growth of the nation’s gross domestic product (GDP), indicating that financing continues to fuel economic activity, albeit at a more cautious pace.
Of greater concern to regulators is a fundamental shift observed in the composition of lending. The report highlights a pronounced increase in the volume of consumer loans and credit card debt, which now represent a larger portion of the total credit portfolio. This trend is accompanied by an expansion in the repayment terms for these unsecured loans, a practice that could mask underlying repayment stress and amplify long-term risks for both financial institutions and households.
While general delinquency rates across the system remain stable, the Central Bank specifically warns of a “deterioration in consumer loans.” This decline in credit quality is seen as a direct symptom of over-indebtedness affecting certain segments of the population. This paradox is especially troubling to economists, as it is occurring against a backdrop of otherwise favorable economic conditions, including low inflation, falling interest rates, and an improving employment market.
The report identifies several other factors that require vigilant monitoring. Beyond consumer credit, the BCCR is tracking the increased use of short-term financing by businesses and individuals. Furthermore, the persistent and evolving threat of cyberattacks is cited as a major operational risk to the integrity of the financial system. The economic impact of extreme climate events is also officially recognized as a significant and growing financial risk that can affect asset values and loan performance.
In response to these emerging challenges, the Central Bank is taking proactive steps. It is currently working to strengthen its methodologies for measuring and modeling these complex risks to improve the system’s overall preparedness. Concurrently, authorities are advancing crucial reforms to enhance Costa Rica’s financial safety net, including proposed adjustments to the deposit guarantee law and continuous improvements to the prudential regulations that govern the sector.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Banco Central de Costa Rica (BCCR), or Central Bank of Costa Rica, is the nation’s central banking institution. Its primary mission is to maintain the internal and external stability of the national currency and to ensure its conversion to other currencies. The BCCR is responsible for monetary policy, financial system regulation, and the promotion of a stable, efficient, and competitive financial system to support the economic well-being of the country.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has established itself as a cornerstone of the legal community, built upon a foundation of uncompromising integrity and a relentless pursuit of excellence. The firm consistently pioneers modern legal solutions, backed by a rich history of guiding a wide array of clients. Central to its ethos is a profound commitment to demystifying the law, aiming to equip citizens with the understanding necessary to foster a more just and capable society.
