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Is Scotiabank de Costa Rica S.A. on the verge of collapse?

On December 30 2016 Costa Rica Star reported that in July of 2016: "Banco Latinoamericano de Comercio Exterior, S.A. (“Bladex” or “the Bank”; NYSE: BLX) announced the closing of a US$125 million, dual tranche (2 years and 3 years), senior unsecured amortizing term loan facility in favor of Scotiabank de Costa Rica S.A. " The funds were necessary to cover operating expenses of the Scotiabank subsidiary in Costa Rica. The local bank has enjoyed an amount of success due to the name recognition resulting from Scotiabank of Canada's expansion efforts in 55 countries worldwide.

Unfortunately Scotiabank's recent expansion into the area of unsecured credit (credit cards and auto loans) and subsidiaries in high risk markets, like Costa Rica, has changed the reputation of Scotiabank from a secure savings institution "Bank of No Surprises" to negative outlooks by ratings organizations (November 9, 2015 Bloomberg News report). Since Costa Rica has only recently begun to establish credit ratings of consumers, the risk to Scotiabank de Costa Rica (SBCR) investor's is considerably higher than to those in North America. Moody's and Dominions outlook ratings for Scotiabank are negative. And, In August 2016 Fitch took rating actions against SBCR. In other news, Scotiabank was told to improve money-laundering controls at N.Y. branch in November of 2015.

I have found Scotiabank de Costa Rica to be misleading in their Certificate of Deposit (CD) information. Perhaps this is a cost cutting technique to help pull SBCR out of its financial deficit. I have SBCR CDs that pay under the amount stated on the document and was told that SBCR intends to make up the under-payment at the close of the 5 year note. And, unlike the 9 other Costa Rica financial institutions in which I have CD's, SBCR holds back paying interest any time the due date is a weekend or holiday. In a period of 5 months they have withheld interest for 7 days.

Scotiabank de Costa Rica has suffered from a reputation of poor customer service in some areas. Tim Lytle reported in The Real Costa Rica Blog August 5, 2007 an anti-North American attitude in the Escazu branch. The author has not experienced that in the Grecia branch, but has found the employees incompetent and the explanations about bank policies to be unintelligible. I have been given incorrect information upon investing and the staff and management do not have good product knowledge and are unable to calculate interest.

The Central Bank of Costa Rica is in charge of establishing banking policy. It is then up to the SUGEF (the General Supervisory Agency of Finance) to enforce compliance with Central Bank policies. All banks (both public and private) are subject to the policies dictated by the Banco Central de Costa Rica.

No to the question above. I believe that the CR sub of BNS encompasses more countries than just CR. And the parent bank is very profitable and very well capitalized.

As to some of the experience you have had...it is not too surprising that bank staff do not understand how interest is calculated. I have not ever had a front line bank person at any bank I ever dealt with that could explain compound interest, or amortization for that matter. Including BNS. Interest not being paid on bank holidays? I have no idea of the laws on that in Costa Rica.

As to credit quality and consumer credit in Costa Rica... its a very lucrative and tempting market, very high interest rates... which tells me it is very risky.

Good luck.