[Music]
Y
[Music]
without a doubt Costa Rica is a highly
seismic because of the geographical location that
we have and that’s why this week even
we ticos are used to
to feel telluric movements I hope
not
earthquakes earthquakes how to prepare
or to plan is through the code
seismic that is the good seismic code
it’s just a set of rules a
set of good practices that have
as a fundamental purpose that the design
of the civil works of the
buildings comply with certain
basic guidelines first obviously
to guarantee the lives of the people who
it’s going to be there
secondly maintain the quality
structural design and therefore
also safeguard all the goods that
they are in the houses or they are in the
apartments
what happens if for some reason the code
seismic is breached
to someone thinking that supposedly
will have cost savings makes a
building and respecting these standards or
these basic or minimum guidelines
Well, just as we see it here
before the smallest telluric movement the
construction no
supports the telluric movement
correspondent
it was supposed that on my plate the
earthquake was going to happen and that
the building was going to fall me here not what
I’m seeing I do not know if you are
seeing if you did see it
not only the problem is that that
who made the decision to respect a
code that is mandatory put at risk
its construction but also we
we run the risk of there being an effect
rebound or a contagious effect on others
buildings that did respect the
seismic code and they were built
on solid foundations that’s what
us in finance or in the system
financial we call systemic risk
or the contagion risk or the domino effect
well I have started this talk
science in structural engineer because
I think there’s a lot of similarity between the
structural design the seismic code and
the design of the structure of the system
financial in the world and in particular
how am I going to develop in the case
from Costa Rica
and if you do not remember the recent crisis
global 2008 of 2008 creates a
innovation a new product is created
called short prime mortgages on
which begin to build
using financial derivatives
synthetic products known as
morgan securities a series of businesses
for growing but as we see it here
it turns out that when the minor came
telluric movement that was a small
rise in the interest rates of those
mortgages that did not have quality and that
had funded with a relationship of
loan at appraised value over 100
percent then all the
structure of large bleu and not only
world system Street fell
that country in particular but a
global crisis that with
millionaire losses and consequences
social who still today are
we experiencing
when roberto invited me to this talk
I thought about saying yes or no
especially in the current conjuncture
see the country, see, I come to
This presentation does not cause panic
will generate fear will not generate fear
I want to make the warning as
participant that I went from the system
financial I think it’s my
social responsibility come to share
with you a series of weaknesses
structural that I consider follows
having the financial system but that
we are still in time I think of
to correct
said that then I’ll start with the
end of the movie when you are interested
watch the end of the movie
and for me the very personal point of view
I consider that the stability of
Costa Rican financial system today not
is prepared eye fully for
endure a systemic financial crisis
without there being fiscal losses
considerable especially because there
an unlimited deposit guarantee
in favor of certain intermediaries and if
we do not understand the case then there is the
agricultural credit bank that has cost you
to the ministry of finance the bank more
small 133 billion colones that
if it does not merge with the coast bank
rich would add to the fiscal deficit that
today we have that our lady
Comptroller mentioned it the fiscal deficit
97.2 is 7.5 for the current losses of
that financial rescue of the credit bank
now we all know that a system
financial its solid foundations the
solid structure is built on two
basic principles trust and
credibility we can not afford
in the current conjuncture that the
trust in any of the
intermediaries does not matter if their character
it is financial if its character is stock market
for the ‘contagion effect’ that this has
in the rest of the system
issues such as liquidity on purpose
the events of recent months
good governance the quality of
information systems the capacity
experience knowledge of the boards
directives and senior management
a responsible and comprehensive vision of
management of operational risks of
credit the market risks are
mandatory elements that as well as
they exist in the construction in the code
seismic should be part of the
fundamental structure of the system
financial is without any doubt
I am going to proceed now to make a
series of signs about
weaknesses that in different studies
are identified without being exhaustive
but if doing a review of where I think
I urgently need to take measures to
solidify the structure of this
building that we call the system
financial
first supervision, see, I lived
in the financial sector 30 years and
I recognize that there have been advances
significant in the quality of the
general supervision of the country but
when one compares the system of
Costa Rican supervision with
international best practices is
mind that even our supervisors
they lack the total tools for
be able to identify early
risks and to be able to minimize and
solve problems agilely
then there I think that there is
work more on the resolution of
problems and about the tools that
have the acting supervisors
in the second place we have given a
big step has changed the focus of
supervision today is called supervision
based on risks in the past we
they were not evaluated based on the camp
Now that I was practicing I said this
my roberto and that and that I wanted then
the good change is the system that
existed before to measure to qualify
to the intermediaries now we are
moving to supervision based on
risks that for me taste its
implementation has been slower than
that one would like secondly I think
that more coordination is needed
between the four superintendencies I think
that a forest vision of
the financial groups and I also think
that you have to necessarily incorporate the
Role of the central bank as the governing body
of macroprudential regulations and there are
that define the territories the
competitions that each one of you
those parts I think there’s homework
still to do although I repeat the
path is well on track
and I have to tell them in the flesh
I lived this, that’s why I put that sheet 10
and August 11, 2004
I’m talking about practically 20 years ago
years
when based on an unfounded rumor
almost broke us at that time the
back and that’s why I came to conclude that
even today the safety net
financial that the system has is
incomplete and is insufficient tearing
so it is called the lender of
last instance or what is called
technically the rediscount when
we were half storm
we try to make use of the
emergency loans that makes the
central bank through re discount
first says the regulation have to
convene a three-person committee
to determine if indeed the
bank is in a liquidity crisis and
those that we have gone through there true one
knows that every minute is gold in second
place if they concluded that committee that
there were indeed problems with liquidity
they have to start asking for guarantees
who qualify for the discount with the
are only surprised that guarantees
real mortgages and credit
short term
and in colones all of us who are in
this activity we know that this phenomenon
is perhaps the scarcest and therefore
for me the rediscount does not work I know
that since 2004 the association
Costa Rican bank raised him
central bank creating a
alternative loan mechanism
emergency and a couple of weeks ago
came out 20 years later the regulation
about that instance but have not yet been
done the operational tests one thing is
graduate with swimming honors in a
blackboard and the other thing is to learn to
swim when one is thrown into the pool
simply drown and you have to do the
tests from whom he called all the
cell phones from the cell phone
wife’s wife true of the
corresponding authorities this is a
24/7 work of the crisis can happen
will happen any minute and therefore
there has to be that fluid communication
between the different participants by
On the other hand, the central bank carries
I would say for decades developing a
deposit insurance bill and
of problem solving that continues without
leave in terms of pension plans
state of defined benefit there are n
actuarial studies that show that
those plans have weaknesses
fundamental and that are not sustainable to
long term someone found out that
help this talk and yesterday in the nation
came out the pension plan of I made for
yes like that there is another series of plans
defined benefit that they have to suffer
adjustments in their parameters to make them
sustainable in the long term which is what
what has happened
there have even been movements for
prevent supervision from working on
them and that has taken even the
judicial strata the polarization is
a phenomenon that causes the risk of
liquidity and solvency risks of
system even more so when not only
the customers but also the same
participating agents consider that the
exchange risk in this country is zero or
it’s very low because the central bank
rescues because the central bank
intervenes because the central bank
It maintains a nominal exchange
artificially low so much so that in
the last four years the devaluation
annual average of this country was 8% point
today there are 800,000 Costa Rican families
indebted in dollars without having
ability to generate dollars today the 40
percent of government debt
central is in dollars
today the liabilities of the entities
autonomous are mostly in dollars
therefore this risk is latent and
I differ from what has been taken as
strategy in recent years that is
demonizing the dollars is not possible
having inflation is one digit the
average loan rate in colones of
this country is still 16 percent a
real bestial rates because it has not
worked on the efficiency of the
intermediation in the competition of the
intermediation in colones
in my opinion the risk exposure of
the stock brokers of the
financial intermediaries of the
portfolio insurance companies
Individuals in sovereign bonds
Costa Ricans have gone hand in hand
make sure you have this diversification
that not all the eggs are in the
same basket but my grandmother also
said and make sure they are not only
in eggs we have sinned only to see
the interest rate paid by us
government bonds of costa rica and us
we have forgotten the clear risk if there is
a liquidity problem and god do not
want an insolvency problem
obviously as a system we are going to suffer
as for the debts of the families
it turns out that intermediaries
financial only have one version
partial view of the leverage of
families that is the central
debtor information where it is not
record the debts with
commercial loans neither is
register debts there every time
older than the informal system and that does
that together with a policy at my discretion
sometimes irresponsible of the
intermediaries who pull their forces
of sales to swim marketshare and place
our families today are in excess
indebted and finally we do not have a
national strategy for inclusion and
financial literacy I know there
individual efforts that you have to
recognize important but this is a
national problem that should be in
the national development plan what is it
what happens our ordinary citizen does not
has the ability to calculate a rate
of effective interest to see how many
they are really charging you in the
financing but at the most good
tell me how much I have to pay for
month on that screen high definition me
reaches not home I’ll take it to me the
game but do not know what the rate of
interest that is being charged
and finally the preferred payment method
remains effective so much so that
we all know that there is not even
only in families but if
certain commercial sectors that handle
large masses of cash there is no
transparency there is no fiscal traceability
and it generates us an operating cost that in
my times we had calculated it of 500
million annually nearly
tax reform that is pretending
to spend today would be saved if we had
a date where the central bank
he says the use of cash disappeared
let’s modernity the payment
electronic as it already exists in the countries
Asians and in other European countries
well I know it has been quite acid
highlighting the weaknesses of the
structure but I would like to conclude my
presentation saying there are solutions there
solutions is not that this can not be
solve and then I would like to give some
solution suggestions obviously what
first is to create a joint commission of
financial reforms in assembly
legislation with the participation of
technical authorities
who know about this matter I have passed
for the legislative assembly and I can
say that the financial knowledge of
the people who are there is minimal
but null therefore it is necessary that
the technical entities get involved and
participate in this mixed commission from
1995 does not exist in the country a
commission of financial reforms in
Second place requires another role
active of the central bank the bank
center has to score the court has
that going to the congress there has to
defend your positions so that you
approve the supervision law
consolidated for the law to be passed
of deposit insurance and resolution of
problems so that the law of
suitability and experience of the boards
directives and senior management
of the banks to approve the
legal protection of supervisors if
the technical bodies are not marking the
court survey delays nothing comes out
simply the projects are filed
and we must implement now that we are
under normal conditions the mechanism
this one of emergency loans or
Finally, see when you are
stuck in the gale in the storm
elements like the following to no not you
I can give colones because people want
effective because the vault of the bank
central automatically opens and it
open from 9 am and I
I offered to the people that from the
7 in the morning could go to replace the
cash to any branch of the back
I do not know if it’s still the vault of the bank
automatic central opens at nine o’clock
in the morning or already has opening to
any time up those elements
specific are important at the time
that we are in the gale and finally
you have to modify the regulation of the
debtors’ information center for
incorporate both informal credit
financial as commercial credit
because they are also sources of risk
systemic I would like to conclude my
presentation that I am optimistic as
Winston Churchill said a pessimist sees
a threat at every opportunity for the
contrary an optimist sees a
opportunity in each
threat I think I’ve been maybe a
little excessive in my presentation because
my grandparents say that the one who
burn with milk until the curds blow
thank you very much
[Applause]
Y
[Music]
without a doubt Costa Rica is a highly
seismic because of the geographical location that
we have and that’s why this week even
we ticos are used to
to feel telluric movements I hope
not
earthquakes earthquakes how to prepare
or to plan is through the code
seismic that is the good seismic code
it’s just a set of rules a
set of good practices that have
as a fundamental purpose that the design
of the civil works of the
buildings comply with certain
basic guidelines first obviously
to guarantee the lives of the people who
it’s going to be there
secondly maintain the quality
structural design and therefore
also safeguard all the goods that
they are in the houses or they are in the
apartments
what happens if for some reason the code
seismic is breached
to someone thinking that supposedly
will have cost savings makes a
building and respecting these standards or
these basic or minimum guidelines
Well, just as we see it here
before the smallest telluric movement the
construction no
supports the telluric movement
correspondent
it was supposed that on my plate the
earthquake was going to happen and that
the building was going to fall me here not what
I’m seeing I do not know if you are
seeing if you did see it
not only the problem is that that
who made the decision to respect a
code that is mandatory put at risk
its construction but also we
we run the risk of there being an effect
rebound or a contagious effect on others
buildings that did respect the
seismic code and they were built
on solid foundations that’s what
us in finance or in the system
financial we call systemic risk
or the contagion risk or the domino effect
well I have started this talk
science in structural engineer because
I think there’s a lot of similarity between the
structural design the seismic code and
the design of the structure of the system
financial in the world and in particular
how am I going to develop in the case
from Costa Rica
and if you do not remember the recent crisis
global 2008 of 2008 creates a
innovation a new product is created
called short prime mortgages on
which begin to build
using financial derivatives
synthetic products known as
morgan securities a series of businesses
for growing but as we see it here
it turns out that when the minor came
telluric movement that was a small
rise in the interest rates of those
mortgages that did not have quality and that
had funded with a relationship of
loan at appraised value over 100
percent then all the
structure of large bleu and not only
world system Street fell
that country in particular but a
global crisis that with
millionaire losses and consequences
social who still today are
we experiencing
when roberto invited me to this talk
I thought about saying yes or no
especially in the current conjuncture
see the country, see, I come to
This presentation does not cause panic
will generate fear will not generate fear
I want to make the warning as
participant that I went from the system
financial I think it’s my
social responsibility come to share
with you a series of weaknesses
structural that I consider follows
having the financial system but that
we are still in time I think of
to correct
said that then I’ll start with the
end of the movie when you are interested
watch the end of the movie
and for me the very personal point of view
I consider that the stability of
Costa Rican financial system today not
is prepared eye fully for
endure a systemic financial crisis
without there being fiscal losses
considerable especially because there
an unlimited deposit guarantee
in favor of certain intermediaries and if
we do not understand the case then there is the
agricultural credit bank that has cost you
to the ministry of finance the bank more
small 133 billion colones that
if it does not merge with the coast bank
rich would add to the fiscal deficit that
today we have that our lady
Comptroller mentioned it the fiscal deficit
97.2 is 7.5 for the current losses of
that financial rescue of the credit bank
now we all know that a system
financial its solid foundations the
solid structure is built on two
basic principles trust and
credibility we can not afford
in the current conjuncture that the
trust in any of the
intermediaries does not matter if their character
it is financial if its character is stock market
for the ‘contagion effect’ that this has
in the rest of the system
issues such as liquidity on purpose
the events of recent months
good governance the quality of
information systems the capacity
experience knowledge of the boards
directives and senior management
a responsible and comprehensive vision of
management of operational risks of
credit the market risks are
mandatory elements that as well as
they exist in the construction in the code
seismic should be part of the
fundamental structure of the system
financial is without any doubt
I am going to proceed now to make a
series of signs about
weaknesses that in different studies
are identified without being exhaustive
but if doing a review of where I think
I urgently need to take measures to
solidify the structure of this
building that we call the system
financial
first supervision, see, I lived
in the financial sector 30 years and
I recognize that there have been advances
significant in the quality of the
general supervision of the country but
when one compares the system of
Costa Rican supervision with
international best practices is
mind that even our supervisors
they lack the total tools for
be able to identify early
risks and to be able to minimize and
solve problems agilely
then there I think that there is
work more on the resolution of
problems and about the tools that
have the acting supervisors
in the second place we have given a
big step has changed the focus of
supervision today is called supervision
based on risks in the past we
they were not evaluated based on the camp
Now that I was practicing I said this
my roberto and that and that I wanted then
the good change is the system that
existed before to measure to qualify
to the intermediaries now we are
moving to supervision based on
risks that for me taste its
implementation has been slower than
that one would like secondly I think
that more coordination is needed
between the four superintendencies I think
that a forest vision of
the financial groups and I also think
that you have to necessarily incorporate the
Role of the central bank as the governing body
of macroprudential regulations and there are
that define the territories the
competitions that each one of you
those parts I think there’s homework
still to do although I repeat the
path is well on track
and I have to tell them in the flesh
I lived this, that’s why I put that sheet 10
and August 11, 2004
I’m talking about practically 20 years ago
years
when based on an unfounded rumor
almost broke us at that time the
back and that’s why I came to conclude that
even today the safety net
financial that the system has is
incomplete and is insufficient tearing
so it is called the lender of
last instance or what is called
technically the rediscount when
we were half storm
we try to make use of the
emergency loans that makes the
central bank through re discount
first says the regulation have to
convene a three-person committee
to determine if indeed the
bank is in a liquidity crisis and
those that we have gone through there true one
knows that every minute is gold in second
place if they concluded that committee that
there were indeed problems with liquidity
they have to start asking for guarantees
who qualify for the discount with the
are only surprised that guarantees
real mortgages and credit
short term
and in colones all of us who are in
this activity we know that this phenomenon
is perhaps the scarcest and therefore
for me the rediscount does not work I know
that since 2004 the association
Costa Rican bank raised him
central bank creating a
alternative loan mechanism
emergency and a couple of weeks ago
came out 20 years later the regulation
about that instance but have not yet been
done the operational tests one thing is
graduate with swimming honors in a
blackboard and the other thing is to learn to
swim when one is thrown into the pool
simply drown and you have to do the
tests from whom he called all the
cell phones from the cell phone
wife’s wife true of the
corresponding authorities this is a
24/7 work of the crisis can happen
will happen any minute and therefore
there has to be that fluid communication
between the different participants by
On the other hand, the central bank carries
I would say for decades developing a
deposit insurance bill and
of problem solving that continues without
leave in terms of pension plans
state of defined benefit there are n
actuarial studies that show that
those plans have weaknesses
fundamental and that are not sustainable to
long term someone found out that
help this talk and yesterday in the nation
came out the pension plan of I made for
yes like that there is another series of plans
defined benefit that they have to suffer
adjustments in their parameters to make them
sustainable in the long term which is what
what has happened
there have even been movements for
prevent supervision from working on
them and that has taken even the
judicial strata the polarization is
a phenomenon that causes the risk of
liquidity and solvency risks of
system even more so when not only
the customers but also the same
participating agents consider that the
exchange risk in this country is zero or
it’s very low because the central bank
rescues because the central bank
intervenes because the central bank
It maintains a nominal exchange
artificially low so much so that in
the last four years the devaluation
annual average of this country was 8% point
today there are 800,000 Costa Rican families
indebted in dollars without having
ability to generate dollars today the 40
percent of government debt
central is in dollars
today the liabilities of the entities
autonomous are mostly in dollars
therefore this risk is latent and
I differ from what has been taken as
strategy in recent years that is
demonizing the dollars is not possible
having inflation is one digit the
average loan rate in colones of
this country is still 16 percent a
real bestial rates because it has not
worked on the efficiency of the
intermediation in the competition of the
intermediation in colones
in my opinion the risk exposure of
the stock brokers of the
financial intermediaries of the
portfolio insurance companies
Individuals in sovereign bonds
Costa Ricans have gone hand in hand
make sure you have this diversification
that not all the eggs are in the
same basket but my grandmother also
said and make sure they are not only
in eggs we have sinned only to see
the interest rate paid by us
government bonds of costa rica and us
we have forgotten the clear risk if there is
a liquidity problem and god do not
want an insolvency problem
obviously as a system we are going to suffer
as for the debts of the families
it turns out that intermediaries
financial only have one version
partial view of the leverage of
families that is the central
debtor information where it is not
record the debts with
commercial loans neither is
register debts there every time
older than the informal system and that does
that together with a policy at my discretion
sometimes irresponsible of the
intermediaries who pull their forces
of sales to swim marketshare and place
our families today are in excess
indebted and finally we do not have a
national strategy for inclusion and
financial literacy I know there
individual efforts that you have to
recognize important but this is a
national problem that should be in
the national development plan what is it
what happens our ordinary citizen does not
has the ability to calculate a rate
of effective interest to see how many
they are really charging you in the
financing but at the most good
tell me how much I have to pay for
month on that screen high definition me
reaches not home I’ll take it to me the
game but do not know what the rate of
interest that is being charged
and finally the preferred payment method
remains effective so much so that
we all know that there is not even
only in families but if
certain commercial sectors that handle
large masses of cash there is no
transparency there is no fiscal traceability
and it generates us an operating cost that in
my times we had calculated it of 500
million annually nearly
tax reform that is pretending
to spend today would be saved if we had
a date where the central bank
he says the use of cash disappeared
let’s modernity the payment
electronic as it already exists in the countries
Asians and in other European countries
well I know it has been quite acid
highlighting the weaknesses of the
structure but I would like to conclude my
presentation saying there are solutions there
solutions is not that this can not be
solve and then I would like to give some
solution suggestions obviously what
first is to create a joint commission of
financial reforms in assembly
legislation with the participation of
technical authorities
who know about this matter I have passed
for the legislative assembly and I can
say that the financial knowledge of
the people who are there is minimal
but null therefore it is necessary that
the technical entities get involved and
participate in this mixed commission from
1995 does not exist in the country a
commission of financial reforms in
Second place requires another role
active of the central bank the bank
center has to score the court has
that going to the congress there has to
defend your positions so that you
approve the supervision law
consolidated for the law to be passed
of deposit insurance and resolution of
problems so that the law of
suitability and experience of the boards
directives and senior management
of the banks to approve the
legal protection of supervisors if
the technical bodies are not marking the
court survey delays nothing comes out
simply the projects are filed
and we must implement now that we are
under normal conditions the mechanism
this one of emergency loans or
Finally, see when you are
stuck in the gale in the storm
elements like the following to no not you
I can give colones because people want
effective because the vault of the bank
central automatically opens and it
open from 9 am and I
I offered to the people that from the
7 in the morning could go to replace the
cash to any branch of the back
I do not know if it’s still the vault of the bank
automatic central opens at nine o’clock
in the morning or already has opening to
any time up those elements
specific are important at the time
that we are in the gale and finally
you have to modify the regulation of the
debtors’ information center for
incorporate both informal credit
financial as commercial credit
because they are also sources of risk
systemic I would like to conclude my
presentation that I am optimistic as
Winston Churchill said a pessimist sees
a threat at every opportunity for the
contrary an optimist sees a
opportunity in each
threat I think I’ve been maybe a
little excessive in my presentation because
my grandparents say that the one who
burn with milk until the curds blow
thank you very much
[Applause]
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