Minimum reserve requirement
The Minimum Reserve Requirement (MRR) is a mandatory, liquid, non-interest-bearing currency reserve that all financial institutions supervised by the Superintendency of Financial Institutions (SUGEF) must hold on deposit at the Central Bank of Costa Rica (BCCR). This requirement is set as a proportion of the deposits and other liabilities received by intermediaries from the public in both domestic and foreign currency. The MRR is governed by the Organic Law of the Central Bank (Law No. 7558).
In Costa Rica, the MRR serves as a key monetary policy instrument for regulating the amount of money circulating in the economy. By adjusting the reserve requirement ratio, the Central Bank directly influences credit availability and interest rates, thereby helping moderate spending and contain inflation.
Besides its role in monetary control, the MRR also serves as a security mechanism that supports the stability of the financial system by ensuring that institutions maintain an adequate liquidity level to meet savers’ demands and operate in a manner consistent with the country’s price stability objectives.
Main objectives
Liquidity Management: Regulate the amount of money in circulation with a view to preventing inflationary pressures.
Financial Stability: Provide an immediate liquidity buffer to meet deposit withdrawals by savers.
Policy Transmission: Ensure that changes in the Central Banks’ strategy are reflected in credit cost and consumption.
Systemic Security: Reduce financial risks through a centralized and strictly supervised reserve.
Key instruments
Reserve Requirement Rate: The specific percentage set by the BCCR’s Board of Directors that is applied to total deposits; an increase in the rate reduces the money available for lending, while a decrease expands it.
Calculation Base: The total amount of funds raised from the public by financial intermediaries, including both demand and term deposits.
Non-Interest-Bearing Reserve: Unlike other investments, the MRR held at the BCCR does not earn interest for the banks, reinforcing their role as a monetary control instrument over return.
Compliance and Supervision: The Central Bank ensures that institutions maintain the required reserve levels and applies sanctions for reserve deficiencies to safeguard the system’s integrity.