Interest rates will have a slight drop from January 2022

The Monetary and Financial Board and the Central Bank announced this Monday the reduction of interest rates in eight of 13 credit segments. This in response to the request of the defunct Monetary and Financial Regulation Board that I had requested to work on a new methodology. The reduction is given through the setting of rates that will come into effect from January 1, 2022.

The president of the Board, Paulina Vela Zambrano, and the manager of the Central Bank, Guillermo Avellán Solines, explained the new methodology, based on four components of the rates, which are the cost of money, operating expenses, the risk of credit and the cost of capital. The sum of these results in the equilibrium rate.

The rates drop a few tenths with respect to the current ones:

1. Business productive credit: current: 10.21%. New methodology: 9.89%.
2. Productive SMEs in force: 11.83%. New methodology: 11.26%.
3. Current consumption: 17.30%. New methodology: 16.77%.
4. Current retail microcredit: 28.50%. New methodology: 28.23%.
5. Simple accumulation microcredits in force: 25.50%. New methodology: 24.89%.
6. Current extended accumulation microcredits: 23.50%. New methodology: 22.05%.
7. Current corporate productivity: 9.33%. New methodology: 8.86%.
8. Current real estate: 11.33%. New methodology: 10.40%.

The new methodology It does not reflect the announcements that had been made previously, in the sense that there was going to be a band system that would allow a higher rate to be applied to those who are at higher risk, and a lower rate for those with a better track record.

For the Central Bank manager, with this new methodology, however, there is an option to lower rates in the future, in the event that the components improve. That is, in the event that, for example, the country risk falls or the cost of funding also decreases, among others.

The new interest rates will take effect on January 1, 2022 and will have a term of six months. However, the Finance Board could reform them if conditions so require.

According to the Board, the methodology proposed by the Central Bank was fully accepted by the entity. This fixation complies with the provisions of numeral 7 literal b of article 14.1 of the Organic Monetary and Financial Code, which says that the Board must establish “the maximum interest rate system of the financial system.” (I)