Financial regulation in Costa Rica compared to the Fed.

 

The Financial regulation is a very important point of the economy of a country because it can influence in the banks, credit organizations in explicit forms, but it can repercuss in the decisions of industries and organizations in implicit forms.

To talk about the financial in a country, is important mention a very specific institution that have the work of put and take the decisions, in the case of USA the most important is the FED, and in the case of Costa Rica, it is the Central Bank.

Understand that USA and Costa Rica have very big differences in the organization of their economies for example the quantity of financial institutions and the size of these, but the idea of have a central institution in their economy is a characteristic of both.

the importance of the Fed and Central Bank in the economies are in different areas for example they can help in the decisions related inflation, the monetary supply and can help in very specific shocks that can destabilized the economy in general.

Focusing in the financial areas FED and Central Bank have the importance of guide the banks in the countries, are these institutions that put the specific minimum legal reserve and can help banks when have a serious problem.

Another importance of these institutions is that both have a very agile communication with the principal banks of the country, it is important because they have a very actualized information for take decisions.

In the specific case of regulations in financial areas the FED and Central bank do not impose what banks, or another financial organization can or cannot do for example in the case of Costa Rica the Central Bank, don’t impose the interest rate and the deadlines of a credits or the medium of pay. This is how it can be seen that if we talk about the similarities of both institutions, the importance of these in the financial system goes more to promoting stability and as supervisory.

Another example of the importance of this entity is in the case of Costa Rica, where  the former the Central entity has the duty to promote exchange rate stability with respect to the dollar, this is one of the points of greatest importance, given that if there was a deficient or highly fluctuating system with respect to the dollar, which is the currency, of greater use worldwide, financial stability speaking of deposits, credits or the like would have great instability and the financial system in general would be highly deficient.

By way of conclusion, as previously mentioned, talking about financial regulation in both countries requires understanding the economic differences of both, their structuring and their use, for which, as stated in this paper, understanding that both have a similar auditing institution and not so much as an authoritarian entity that sets and disposes of rules, it is a good starting point to understand the relevance that financial regulation has in the economy of a country.