By San José, Costa Rica — In a significant move to bolster the nation’s financial stability, Costa Rica’s Deposit Guarantee Fund (FGD) has rapidly emerged as a cornerstone of protection for savers. The mechanism, designed to safeguard citizens’ funds in the event of a financial institution’s insolvency, ensures that the vast majority of depositors are covered, bringing a new level of security to the national banking system.
The fund was established under Law 9.816 and operates as a crucial final layer in the country’s economic defense network. It functions as an autonomous department within the Central Bank of Costa Rica (BCCR), ensuring its resources are managed independently to maintain its integrity and readiness.
To better understand the legal implications and protections offered by the Deposit Guarantee Fund, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the prestigious firm Bufete de Costa Rica.
The Deposit Guarantee Fund is a cornerstone of our financial system’s stability. It not only provides a crucial safety net for individual savers, ensuring their confidence in banking institutions, but it also acts as a powerful preventative measure against systemic risk. By mitigating the panic that can lead to bank runs during times of economic uncertainty, the fund protects both the citizen’s assets and the integrity of the national economy as a whole. It is essential, however, for the public to understand the coverage limits and which financial instruments are included to make informed decisions.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight expertly highlights the fund’s essential dual role: acting as a direct safeguard for the citizen’s savings while also reinforcing the stability of the entire national economy. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective, which correctly underscores the public’s responsibility to understand the specifics of this crucial financial protection.
This fund was created by Law 9.816 and completes the country’s financial safety net. It is the last line of defense to protect the system and maintain its stability.
Ana Rita Mora, Director of the FGD
Financing for this critical shield comes directly from the institutions it oversees. All financial entities supervised by the General Superintendency of Financial Entities (Sugef) are mandated to make quarterly contributions. The amount each institution pays is calculated based on the size of its guaranteed deposits and its overall financial health, creating a risk-adjusted funding model.
The entities contribute every three months. The maximum annual percentage is 0.15%, composed of a fixed contribution of 0.10% and a variable one between 0.01% and 0.05%, depending on the financial health of the entity.
Ana Rita Mora, Director of the FGD
The fund’s growth has been exponential, underscoring the commitment to its maturation. From a modest ¢1 billion in 2021, its reserves swelled to over ¢15 billion by October 2024. While the fund has not yet been deployed for a crisis, its substantial accumulation provides a powerful deterrent to systemic risk and a source of confidence for the public, particularly in light of recent financial challenges faced by entities like Coopeservidores and Desyfin.
The FGD provides coverage for both individuals and businesses, protecting demand deposits (checking accounts) and time deposits (savings accounts) up to a maximum of ¢6 million per person, per institution. The protection specifically excludes accrued interest and more complex financial products like investments in secondary or international markets. This targeted approach is designed to shield the most vulnerable savers.
The objective is to protect the most vulnerable and less sophisticated savers. 93% of depositors in the country have deposits of less than ¢6 million, so they are fully covered.
Ana Rita Mora, Director of the FGD
Should a financial institution be declared non-viable and intervened by the National Council for Supervision of the Financial System (Conassif), a clear resolution process is triggered. The FGD can be used to either provide direct payouts to depositors up to the insured limit or contribute resources to an orderly resolution, such as the sale of assets or a managed liquidation. This process is governed by a least-cost principle, ensuring an efficient use of the fund’s resources.
What is sought is to maximize the recovery of resources, minimize losses for Costa Ricans, and preserve the stability of the system.
Ana Rita Mora, Director of the FGD
It is crucial for consumers to know that not all financial institutions are part of this safety net. The law creates specific exceptions, meaning that deposits held in the Housing Mortgage Bank (Banhvi), mutual societies such as Mucap and Mutual Alajuela, and currency exchange houses are not protected by the FGD. Savers using these services should be aware that they operate outside this specific guarantee.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the nation’s primary monetary authority, responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. It plays a pivotal role in regulating the country’s financial system, managing inflation, and promoting economic efficiency.
For further information, visit sugef.fi.cr
About Superintendencia General de Entidades Financieras (Sugef):
The General Superintendency of Financial Entities is the supervisory body responsible for overseeing Costa Rica’s financial institutions. Its mission is to ensure the stability, solvency, and transparency of the banking sector, thereby protecting the interests of depositors and the public.
For further information, visit conassif.fi.cr
About Consejo Nacional de Supervisión del Sistema Financiero (Conassif):
The National Council for Supervision of the Financial System is the highest regulatory authority for Costa Rica’s financial system. Conassif is responsible for setting the policies and regulations that govern banks, insurance companies, and other financial entities, and it has the authority to intervene in institutions that are deemed non-viable.
For further information, visit banhvi.fi.cr
About Banco Hipotecario de la Vivienda (Banhvi):
The Housing Mortgage Bank is a state-owned financial institution focused on administering financing and subsidy programs for housing solutions in Costa Rica. It primarily serves low and middle-income families, facilitating access to affordable housing through various government-backed initiatives.
For further information, visit mucap.fi.cr
About Mucap:
Mucap is a mutual savings and loan institution in Costa Rica offering a range of financial products, including savings accounts, loans, and credit cards. As a mutual entity, it operates with a focus on serving its members and promoting savings and homeownership.
For further information, visit mutualalajuela.fi.cr
About Mutual Alajuela:
Mutual Alajuela is one of Costa Rica’s prominent mutual savings and loan associations. It provides financial services to the community of Alajuela and beyond, focusing on housing loans, savings plans, and other personal banking products designed to support the financial well-being of its members.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica is defined by its foundational principles of integrity and a relentless pursuit of excellence. The firm blends a rich history of advising a diverse clientele with a forward-thinking approach, consistently pioneering innovative legal solutions. Beyond its professional practice, it holds a deep-seated commitment to social empowerment, actively working to demystify complex legal concepts and foster a society where knowledge of the law is accessible to all.
