To better understand the role that banks play in the economic system, it is necessary to define them as entities that make the public intermediation of financial resources their specific and habitual activity. The concept of a bank, intimately linked to money creation, turns banks into monetary financial intermediaries, creators of money through the use of public sight deposits, unlike other intermediaries that only attract term resources and cannot create money.

Early Experiences

Coffee Credit

In Costa Rica, the expansion of coffee cultivation from 1843 to 1870 brought about changes in financing patterns and socio-economic and political structures. The consolidation of the hegemonic class, the coffee growers, occurred as they took control of the State. With the expansion of coffee cultivation, land and labor prices, as well as the costs of cultivation and processing techniques, increased. This necessitated external financing from English commercial houses. These houses provided credit on harvests, using Costa Rican representatives and commercial companies, which in turn lent to small and medium-sized landowners, many of whom lost their properties for failing to repay their debts. With control over credit, these commercial coffee growers acquired land, profits, and subordinated medium and small producers through imposed credit mechanisms.

The First Bank

In the mid-19th century, between 1847 and 1849, under the administration of Dr. José María Castro Madriz, the first efforts were made to establish a bank. In 1851, Dr. Castro Madriz presented a proposal to the Legislative Power to establish a bank, which would be named Banco Nacional de Costa Rica.

During this time, Dr. Castro made two formal attempts before Congress to establish a bank, but they were unsuccessful due to political and personal arguments against the president. In 1857, the idea of establishing a banking institution in Costa Rica emerged again. By that time, the country had increased its commercial activity, population, and agriculture. Therefore, the economy demanded the existence of an institution to facilitate trade and mobilize economic resources. Banco Nacional de Costa Rica, also known as Banco de Medina, was inaugurated on June 15 of that year and concluded on March 31, 1859, due to a proposition to establish a bank named Banco Nacional de Costa Rica.

Creation of the Anglo-Costa Rican Bank

Five years later, on June 25, 1863, the Anglo-Costa Rican Bank, the dean of the National Banking System, was founded. It was constituted as a limited partnership with a capital of one hundred thousand dollars ($100,000), subscribed by Allan Wallis and Eduardo W. Allpress, both English, and Mariano Montealegre Fernández, a Costa Rican. They were the initiators and first directors of the institution.

The Anglo Bank was the first to establish the check as a means of payment, conducted credit operations, sold lots, and established an agency in Puntarenas and others in Panama and Guatemala.

In 1948, for reasons of public utility, the shares of the Anglo-Costa Rican Bank were expropriated, and the state, through the Ministry of Economy, immediately took possession of the institution. It remained a state bank until September 14, 1994, when it concluded its operations. The government’s argument for this closure was that it accumulated excessive losses due to the erroneous investment in bonds of the external debt of the Government of Venezuela.

Creation of Other Banks (1867-1876)

In 1872, the first project of the Rural Mortgage Credit Bank appeared with the aim of promoting and assisting agriculture by collaborating with the lowering of the interest rate. This project involved granting a loan to farmers, covered with credit bonds and guaranteed with first-grade mortgages. However, the project failed.

On September 6, 1876, a request was made to the Provisional President of the Republic, Vicente Herrera, for the creation of a bank called “Banco de Emisión” with the purpose of improving the country’s economic situation through prudent credit use. This project had a short life.

During the period from 1867 to 1876, a series of lesser-known banks were formed, which closed their doors. However, it is important to note that these, at their time, offered various banking services alternatives to their clients and users.

Creation of the Bank of the Union (1877) (Bank of Costa Rica)

On April 15, 1877, in the province of San José, the Bank of the Union was founded, and its constitution was formally signed on April 20 of the same year. This bank operated until November 17, 1890, under this name, and from there, it took the name of Banco de Costa Rica.

This institution was established as a privately-owned bank, whose administration would be in charge of a board of directors appointed by the shareholders and an administrator.

On November 17, 1890, the Bank of the Union assumed the name of Banco de Costa Rica and maintained the exclusive issuance privilege until 1900 when the “gold standard” came into effect, allowing multiple issuances. From this date, it only maintained the main administration of revenues, judicial deposits, and the commitment to grant credits to the Government. It also issued its banknotes in accordance with the General Banking Law of 1900, the Currency Law of 1896, and the Executive Decree of April 17, 1900.

Creation of the International Bank of Costa Rica (National Bank of Costa Rica)

First National Bank of Costa Rica (1849-1859)

In 1857, under the presidency of Don Juan Rafael Mora, the idea of Dr. José María Castro to create a bank began to take shape. It was then that Mr. Crisanto Medina, an Argentine residing in Costa Rica, made a contract with the Executive Branch for the foundation of a bank. This document was signed on June 2, 1857, and thus, the Banco Nacional de Costa Rica was born for the first time.

Second National Bank of Costa Rica (1867)

In the second administration of Dr. José María Castro, the contract for a bank with significant state participation was approved in February 1867. It was founded on July 10, 1867, and on August 15 of the same year, it began operations. This bank operated for only ten years, serving the country and the Government, fulfilling its social function and benefiting the public and private sectors of Costa Rica. International loans and the non-renewal of the bank’s operating contract, due to its refusal to continue financing the Government for the construction of the Atlantic railway, led to its closure.

Third National Bank of Costa Rica (1877)

The third National Bank of Costa Rica, later renamed Banco de Costa Rica, was born by decree of General Guardia dissolving the Constitutional Congress. Later, the bank elevated its previous decision to law on December 24, 1877, and began operations on February 20, 1878.

Fourth National Bank of Costa Rica (1914)

On October 9, 1914, by Decree No. 16, the International Bank was created under the Administration of Alfredo González Flores. This was state-owned, and its foundation was motivated by the refusal of existing banks that made up the Banking System to grant a loan of two million colones to the Government to meet its fiscal needs, arising from the conflict of the First World War.

On November 5, 1936, the name of the International Bank of Costa Rica was changed to Banco Nacional de Costa Rica, consolidating itself since then as a true development bank with a transcendent and positive impact on the economic, social, and financial life of Costa Rica.

In 1948, for reasons of public utility, the shares of the National Bank of Costa Rica were expropriated, and the state, through the Ministry of Economy, immediately took possession of this institution.

Creation of the Agricultural Credit Bank of Cartago

On June 1, 1918, the Agricultural Credit Bank of Cartago was created, which was established as a joint-stock company and had the peculiarity of being provincial. It was created by purely Cartaginese citizens with the aim of achieving greater development in their province.

The objective of the Agricultural Credit Bank of Cartago was to negotiate with all agricultural branches. Among the activities it carried out were the purchase or sale of estates, grains, and others; it could also advance money to farmers on their crops, make loans to them, and provide facilities for the management of their own funds, as well as perform other banking functions.

Banco Lyon, SA

In 1842, Captain William Le Lacheur, who transported goods from London, England to Mazatlan, Mexico, made a stop in the Gulf of Fonseca to stock up on indigo and cotton, among other goods he was taking back to London. While there, he learned that in a small country to the south, coffee cultivation was beginning to prosper, with difficulties in marketing. Its export to Europe was via Valparaiso, Chile.

On his next trip to Mazatlan, he remembered the coffee trade and arrived in Costa Rica in 1843. From Puntarenas, he traveled to San Jose, where he met and befriended the brothers Santiago and Gordiano Fernández Ramírez. His first shipment from Puntarenas to London consisted of 4,393 sacks of coffee, 4 tons of mother-of-pearl, and 2 boxes of gold and silver chains. In July 1996, it was acquired by a Panamanian consortium, also changing its name to Banco del Itsmo, SA.

Central Bank
Historical Development of the Central Bank

Initially, the central bank was known as the entity with the monopoly of issuing banknotes and managing the State’s banking operations. Over time, its functions expanded to maintaining the convertibility of the currency to gold, silver, or foreign currencies. It later acquired other functions, such as being the regulatory reserve bank for credit and currency.

Currently, it promotes the orderly development of the Costa Rican economy, ensures the proper use of international monetary reserves, promotes payment efficiency, and ensures a stable, efficient, and competitive financial system.

The Central Bank of Costa Rica was established during the time of the First World War (1914) under the name Banco Internacional de Costa Rica. Its main objective was to provide a loan to the Government to meet its fiscal needs and comply with the national budget expenses.

Popular and Communal Development Bank

In 1969, feeling the need in Costa Rica for an institution to solve financial problems for the working class, Law No. 4351 was issued on July 11 of the same year, transforming the Monte Nacional de Piedad into a capitalized savings fund and a workers’ bank.

The Popular and Communal Development Bank acts as a non-state public institution, with its own legal personality and patrimony, and with administrative and functional autonomy.

Its fundamental objective is the economic protection and well-being of workers through the promotion of savings and the satisfaction of their credit needs.

International Bank of Costa Rica, SA (BICSA)

It was born in 1976 within private law as a joint-stock company. Its shares were acquired by the four existing state banks at that time (National, Bancrédito, Costa Rica, and Anglo), with the sole aim of Costa Rican banking crossing borders. This allowed Costa Rica to overcome the economic contraction that began and deepened in the 1980s. At that time, it was thought to be an efficient bank to mitigate the effects of the restructuring of external debt and maintain a normal, uninterrupted flow of commercial transactions.

In 1987, due to the need to offer complementary services with business abroad, BICSA’s representation office in Costa Rica became a Costa Rican private bank. However, with 100% of the shares owned by the public sector, the Attorney General’s Office and the Judiciary have stated that it is an entity of public law. Its share capital is distributed as follows: Banco Nacional: 55% (including a percentage previously purchased from the Central Bank). Banco de Costa Rica: 20%. Bancrédito: 10%. Ministry of Finance: 15% (previously owned by the Anglo Bank).

Cooperative Banking

Cooperative banks were created by Law 6894 of September 22, 1983. They are part of the National Banking System and must be governed by the provisions of the organic laws of the National Banking System, the organic law of the Central Bank of Costa Rica, and cooperative association regulations.

To create a cooperative bank, at least ten Costa Rican cooperative organizations must come together, which, according to SUGEF, are determined to be economically, financially, and administratively solvent and competent, according to the requirements established in the bylaws.

Cooperative banks can carry out, with cooperative associations, joint-stock companies, and individuals, all active and passive operations authorized by the laws and regulations of state banks, except those that only fall under the competence of state banks. In the event that cooperative banks decide to formalize active credit operations typical of the capitalization section of state banks, they must send a study on the organization and operation of the respective section to the Superintendency of Financial Entities.

Solidarity Banking

By the enactment of the Law for the Modernization of the Financial System of the Republic (Law No. 7107) on November 4, 1988, the creation of development and social interest solidarity banks, non-profit, with their own legal personality, was authorized.

Solidarity banks that are formed will be governed by the Organic Law of the National Banking System, the Organic Law of the Central Bank of Costa Rica, the Solidarity Associations Law, and the general and specific regulatory provisions issued by the Central Bank of Costa Rica.