Amendments to the General Law of Banks, Non-Banking Financial Institutions and Financial Groups
Bertha Argüello, Uriel Balladares and Eleonora Castillo, experts in Banking and Finance, share the following news: The amendments to the General Law of Banks, Non-Banking Financial Institutions and Financial Groups were approved, the purpose of which is to strengthen the regulatory framework of the sector and the role of the financial regulator.
On February 25, 2025, Law No. 1237, Law of Amendments and Additions to Law No. 561, General Law of Banks, Non-Banking Financial Institutions and Financial Groups, was published in La Gaceta, Official Gazette, and became effective as of its publication.
The referred law is intended to strengthen the regulatory framework of the financial sector, mainly that:
a.Savings and credit cooperatives, as well as special regime companies dedicated to providing financial technology services of intermediation and financing, will be subject to the regulation and supervision of the Superintendence of Banks and Other Financial Institutions ("SIBOIF”).
b.The initial capital and capital adequacy requirements of banking institutions are strengthened, since the previous legislation established that the capital stock of a national bank or the branch of a foreign bank may not be less than two hundred million cordobas (C$200,000,000.00). Whereas now the capital stock of a national bank or the branch of a foreign bank may not be less than five hundred million cordobas (C$500,000,000.00) (equivalent to approximately US$1,365,138.00 ).
c.Regulates the following capital reserves:
i.Capital conservation reserve of 2.5% of risk weighted assets;
ii.Temporary counter-cyclical capital reserve of 2.5% of risk-weighted assets and,
iii.Systemic risk reserve applicable to systematically important financial institutions of 3% of risk-weighted assets. Systematically important financial institutions are those with total assets over fifty billion cordobas (C$50,000,000,000,000.00) (equivalent to approximately US$1,365,214.00), also considering the size of the institution, market share, interconnection with other financial institutions, degree of substitution in the provision of financial services or others determined by the SIBOIF.
The reserves listed under (i) and (ii) will be implemented gradually, with an increase of 0.5% semiannually, as of the effective date of the new regulations.
d.Modifies concepts that integrate the capital calculation base of the institutions supervised by the Superintendency.
e.Incorporates new provisions on corporate governance, highlighting risk prevention and management.
f.Strengthens supervisory activities, basing them on risk and continuous stress tests.
g.Integrates at least 30% of independent directors into the Boards of Directors of financial institutions.
h.Empowers the SIBOIF to establish limits on interest rates, as well as commissions, fees and any other charges applicable to its asset and liability operations.
i.Prohibits the granting of unsecured loans, without prejudice from activities authorized by the Superintendency for loans not exceeding five million cordobas (C$5,000,000.00) (equivalent to approximately US$136,521,00). Failure to comply with this obligation entails both the imposition of a fine, and that the credits thus granted will be provisioned at 100%.
j.The supervised institutions must submit models of their contracts for approval by the SIBOIF.
Finally, the ranges of fines have been updated, bringing them into line with the provisions of Law No. 1232 "Law for the Administration of the Monetary and Financial System”, eliminating the concept of fine units and replacing it with the equivalent of a percentage of the sanctioned financial institution's equity:
1. Minor Infractions: between zero and one thousandth percent (0.001%) and zero and one hundred and twenty-five thousandths’ percent (0.125%) of the equity.
2. Moderate Infractions: between zero with one thousand two hundred and fifty-one ten thousandths’ percent (0.1251 %) and zero with twenty-five hundredths percent (0.25%) of the equity.
3.Serious Infractions: between zero and two hundred and fifty-one thousandths’ percent (0.251%) and zero and five tenths’ percent (0.5%) of the equity.
If you have any doubts about the matter referred to herein, do not hesitate to contact us.
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