As part of the process of entering the OECD and with the aim of guaranteeing financial stability, the Costa Rican congress recently approved a Bill of Law allowing branches of foreign banks to operate in Costa Rica and form part of the National Banking System.
Currently, only locally constituted corporations (sociedades anónimas) can obtain a banking license and perform financial intermediation which allows them to receive deposits from the public and use that money in lending or other financial activities (lending activity per se by local or foreign lenders does not require a banking license).
With this legal reform, foreign banks will be allowed to establish a local branch and perform financial intermediation as well as all financial activities authorized to private banks in Costa Rica. These branches will be considered as extensions of the foreign bank and not as a separate legal entity.
To register a branch of a foreign bank, the law establishes the following requirements:
a) Proxy to a local representative who will head the branch, in accordance with the requirements established in Article 226 of the Code of Commerce;
b) Proof that the foreign bank is duly authorized by the competent authority in its country of origin;
c) An indication that the object of the branch is exclusive and limited to the banking activity in accordance with Costa Rican laws;
d) Indication of the domicile in which the branch will have its physical presence;
e) The branch shall have assigned a minimum capital, in accordance with the regulations issued by CONASSIF;
f) The foreign bank is subject the regulations and competent financial supervisor in its country;
g) The competent authority in the country of the foreign bank shall grant a "no objection" with respect to the creation of the branch.
Additionally, CONASSIF (the financial regulator) will need to issue further regulations detailing additional requirements that must be met to register foreign bank branches (including capital requirements). These branches will also be supervised by the banking regulator (SUGEF).
Bill 21.292 has already been approved in Congress and is awaiting the signature of the President and publication in the official newspaper to become a law.
Diego Gallegos - Senior Associate
Felipe Volio - Paralegal