Guatemala: Banking & Finance

Guatemala’s banking national authorities are: The Monetary Board, Guatemala´s Central Bank and the Superintendency of Banks.

Guatemala´s monetary, banking, and financial activities are organized under a Central Bank system, overseed and directed by the Monetary Board. The Monetary Board supervises everything related to money movements and public debt.

Guatemala´s Central Bank is in charge of creating and maintaining the most favorable conditions for the organized economic growth of the national economy and is the only authorized issuer of the national currency (Quetzals).

The Superintendence of Banks is a technical body of Guatemala´s Central Bank, directed by the Monetary Board and in charge of supervising and inspecting banks, financial entities, credit institutions, insurance and bonding companies, general deposit warehouses, money exchange companies, financial groups, and any other entity.

The usual receipt, in a public or private form, of money or any instrument representing money, from the public, such as deposits, bonds, or any other financial instrument destined to grant financings of any nature, regardless of the legal form implemented to evidence such deposits and financings.

Entities that receive deposits or transfers from their associates and third parties and are governed by their specific rules and regulations, are exempted from obtaining a banking license, such as cooperatives, mutualists entities, non-profit organizations, development private organizations, amongst others. Notwithstanding the above, these entities are obliged to present any required information to the Superintendency of Banks.

Finally, the Banks and Financial Groups Law, Decree 19-2002 of Guatemala’s Congress, and its amendments, also regulates the activities allowed to perform by financial entities, whether they are or not part of a financial group. These entities are legally referred to as companies that support the banking business [1].

Footnotes:

1. Article 38 of the Banks and Financial Groups Law, Decree 19-2002 of Congress, and its amendments.

The Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments, regulates the existence of [1]:

1. Commercial banks;
2. Savings and loans for family homes banks; and
3. Representation offices of foreign banks and foreign banks branches.

Each of the above have their specific rules and regulations but are all supervised by the Superintendence of Banks.

Footnotes:

1. Article 5 of the Banks and Financial Groups Law, Decree 19-2022 of Congress, and its amendments.

In accordance with the Banks and Financial Groups Law, Decree 19-2002 of Congress, and its amendments, the banks authorized by law can perform, in national or foreign currency, any of the following activities and services [1]:

1. Passive Transactions:
   1. Receive monetary deposits;
   2. Receive long-term deposits;
   3. Receive savings deposits;
   4. Issue and negotiate bonds and/or promissory notes, prior authorization from the Monetary Board;
   5. Obtain financing from Guatemala´s Central Bank;
   6. Obtain credits from national and foreign banks;
   7. Issue and negotiate debentures;
   8. Issue and negotiate subordinated obligations; and
   9. Execute repurchase operations agreements as purchaser.
2. Active Transactions:
   1. Grant credits;
   2. Execute discount agreements;
   3. Grant financing through letter of credit;
   4. Grant export money advances;
   5. Issue and operate credit cards;
   6. Execute leasing agreements;
   7. Execute factoring agreements;
   8. Invest in securities issued and/or guaranteed by the government, by authorized banks in accordance with the laws or private entities. In case of securities issued by private entities, the prior authorization of the Monetary Board will be required.
   9. Acquire and maintain ownership of assets or real estate, if they are for their use;
   10. Make deposits in national or foreign banks;
   11. Execute repurchase operations agreements as seller.
3. Confidence or Trust Operations:
   1. Collect and pay on behalf of third parties;
   2. Receive deposits with financial investment option;
   3. Purchase and sell securities on behalf of third-parties;
   4. Act as financial agent in charge of the debt service, interest payments, commissions, and capital payments.
4. d) Potential Passive Transactions:
   1. I. Grant guarantees;
   2. II. Issue or confirm letters of credit
5. e) Services:
   1. I. Acting as trustee;
   2. II. Purchase and sell foreign currency, in cash and represented by securities;
   3. III. Issue letters of credit;
   4. IV. Collecting services;
   5. V. Transfer of funds; and
   6. VI. Leasing safe deposit boxes.

Footnotes:

1. Article 41 of the Banks and Financial Groups Law, Decree 19-2002 of Congress and its amendments.

No, under the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments, the banks can only execute the acts and perform the services contained in their specific laws (i.e. the law for the savings and loans for family homes banks), the Banks and Financial Groups Law, the dispositions issued by the Monetary Board, and as applicable Guatemala’s Central Bank Act, the Monetary Law, the Financial Supervision Act and the applicable laws and regulation of the country [1].

Footnotes:

1. Article 5 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments.

Yes, in accordance with Guatemala’s Political Constitution, only the government can issue and regulate the currency [1] and in accordance with the Central Bank’s Law, Decree 16-2002 of the Congress, one of the main purposes of Guatemala´s Central Bank is to be the sole issuer of the local currency [2]; therefore, in Guatemala the crypto currencies are not recognized as currency given, they don’t comply with the legal requirements for issuing currency.

Footnotes:

1. Article 132 of Guatemala´s Political Constitution.
2. Article 4, a) of Guatemala´s Central Bank Act.

No, as stated before, the crypto currencies and assets are not recognized by our local banking and financial rules and regulations as currency.

As previously mentioned, crypto assets are neither deposits nor currencies under our local banking and financial rules; thus licensed legal entities in Guatemala (i.e. banks and other financial institutions) cannot hold crypto assets and there are non-applicable capital requirements.

The average timing to organize and constitute a bank is between 12 and 14 months and the general process is as follows:

1. Request for the Monetary Board to authorize the organization and constitution of a bank (as a share-based company) shall be presented to the Superintendency of Banks which shall include [1]:
   1. Identification information of the founding shareholders. If entities will be shareholders, then they should also present the identification information of their legal representative.
   2. Address to receive notices;
   3. Name of the bank in formation;
   4. Law basis and reasons for requesting the authorization;
   5. Specific request;
   6. Date and place of the request for authorization;
   7. Signature of the people requesting the authorization, legalized by a notary; and
   8. List of the documents annexed to the request, which shall include:
      1. Feasibility economic and financial study;
      2. Draft of the public deed of the articles of incorporation of the new bank;
      3. From the shareholders and administrators’ certain information shall be accompanied (curriculum vitae, asset and income declarations, certified copies of their identification documents or passports, tax id, certified copy of the articles of incorporation and of the document evidencing the legal representation, two commercial and banking referrals, amongst others)
         Notarial deed in which the express consent from the founding shareholders is stated for the Superintendency of Banks to verify, in or outside of the country, all the presented information and documents.
2. The Superintendence of Banks will review the received request and information and if more information is required, it will notify it and the requesting parties will have 30 days to solve the requirement. This term can be extended prior reasoned request.
3. If the presented request and documents are complete and satisfactory to the Superintendence of Banks, then a publication of the request for authorization shall be made in the Official Gazette and in another local newspaper, three times within 15 days and they shall include the names of the founding shareholders. Any interest party can present their objection to the creation of the new bank within 30 days of the last publication.
4. Once the third publication is made, the requesting parties, shall present to the Superintendence of Banks the newspapers in which all publications were made within 5 days since the last publication was made.
5. The Superintendence of Banks, after investigating, confirming and analyzing all the presented documents and information, will have 6 months to issue and present a report to the Monetary Board for their review and approval.
6. The Monetary Board will review the report within 30 days from its reception, can request additional information or clarifications, and will authorize or denied the authorization for the organization and constitution of the bank, returning the file to the Superintendence of Banks.
7. The interested parties shall open a deposits account at Guatemala´s Central Bank where the initial equity of the bank will be deposited prior to the execution of the articles of incorporation of the bank.
8. Once the above stated deposit has been made and the Monetary Board resolution has been notified, the articles of incorporation can be executed.
9. A certified true copy of the articles of incorporation shall be presented to the General Mercantile Registry together with the certified copy of the Monetary Board for registration.
10. After the bank is registered before the Mercantile Registry, a certified copy of the articles of incorporation shall be presented to the Superintendence of Banks.

Footnotes:

1. Guideline for the organization of private local banks and private financial entities issued in accordance with the Banks and Financial Groups Law, Decree 19-2002 of Congress, and its amendments, The Private Financial Entities Law, Decree No. 208 of the Congress and Resolution JM-78-2003 of the Monetary Board.

Under the Banks and Financial Groups Law, Decree 19-2002 of Congress and its amendments, the local banks can create branches abroad, subject to the prior authorization of the Superintendence of Banks and to the existence of a supervision with international standards that allow for a merged supervision in the country where the branch will be created [1].

Footnotes:

1. Article 14 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments.

By legal requirement [1], all banks shall be organized and constituted as share-based companies in accordance with the local applicable rules and regulations.

Footnotes:

1. Article 6 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments.

The banks shall have a board of directors constituted with 3 or more directors and with the general man-agers or other managers, as determined by each bank. All members shall evidence to have economic solvency, to be honorable, with knowledge and experience in the banking and financial business and managing risk factors.

The Monetary Board issued through the resolution JM-62-2016, the Corporate Governance Regulation in which the following general principles were included:

• Policies for the approval, control and disclosure of transactions with related parties;
• Policies related to conflict of interests;
• Policies regarding the general manager and executives who report directly to him, as well as profile of the comptroller and the succession of the job positions;
• Policies for the remuneration and assessment of the general manager and the managers decided by the board of directors;
• Policies to regulate relations with suppliers and suppliers; and
• Rules for the application of administrative and corrective procedures for the general manager and the executives reporting directly to him.

As stated before, and in accordance with the Corporate Governance Regulation [1], the banks shall implement policies regarding the remuneration and assessment of the general manager and other managers, as decided by the Board of Directors, and this shall be according to the strategic long-term purposes, a prudent risk assumption and the banks strategy.

Footnotes:

1. Article 3, d) of the Monetary Board Resolution JM-62-2016

Yes Guatemala has implemented the Basel III framework regarding the regulatory capital; however, there aren’t any major changes, since Basel III only simplified and strengthen the capital ratio numerator and introduced certain prudential elements to the applicable rules.

No, Guatemala has not implemented the Basel III framework in this regard.

Liquidity requirements are contemplated in Resolution JM-117-2009 and JM-34-2020 Regulation for Liquidity Risk Management, in force as of April 1, 2010, which indicates that institutions must establish and implement policies, procedures and systems for a adequate management of liquidity risk, in order to identify, measure, monitor, control and prevent liquidity risk. This includes the Basel III LCR liquidity requirement. The NSFR Basel III liquidity requirement has not been implemented yet in Guatemala.

In addition, the Circular Letter No. 5739-2009 addressed to Banks, Financial Institutions and Out of Market Entities, establishes the requirement for entities to send to the Regulator the estimate of Liquidity at Risk, defined as the deficit of available liquid assets to cover the negative accumulated liquidity gap determined in one of the first five time bands, this being:

Band 1 = 1 to 7 days
Band 2 = 8 to 15 days
Band 3 = 16 to 30 days
Band 4 = 31 to 60 days
Band 5 = 61 to 90 days
Band 6 = 91 to 180 days
Band 7 = 181 to 365 days
Band 8 = over 365 days

Yes, they must publish their financial statements. In accordance with the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments, the banks must disclose to the public information regarding their financial situation in accordance with the Superintendence of Banks instructions [1].

Article 5 of the annex to the Accord No. 16-2007 of the Superintendent of Banks contains the instructions for the publication of information from banks, financial entities, money exchange companies, insurance and bonding companies and indicates that these entities shall publish on a monthly-basis, in one or more widely used newspaper, the condensed general balance sheet of the prior calendar month within 15 days of each month and within 15 days following the closing of each fiscal year, the income statement certified by a legally authorized public accountant.

Also, all entities supervised by the Superintendence of Banks shall annually publish, in one or more widely used newspaper, the audited financial statements at the very latest on the last day of February following the closing of the fiscal year.

Footnotes:

1. Article 62 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

Yes, in accordance with article 28 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress and its amendments, the consolidated supervision is performed by the Superintendence of Bank over a financial group with the purpose that all entities will adjust their activities and operations to the applicable laws, rules and regulations and that the risks assumed by those companies and that can negatively affect the bank are assessed and controlled on a joint and separately basis. The Superintendence of Banks will have access to the information of the operations and activities of the financial group, on a separate and jointly basis, maintaining the confidentiality of the depositors and investors in accordance with the law.

All persons wishing to acquire, direct or indirectly, shares representing 5% or more of a bank’s capital, shall have the prior authorization of the Superintendence of Banks, who will verify the compliance of the requirements applicable to the shareholders of new banks. The approval will also be required in case an existing shareholder wishes to increase their share ownership in a bank to 5% or more.

All banks shall present to the Superintendence of Banks, annually in January, all the information of its shareholders and the amount and percentage of shares of each one in the banks equity [1].

Footnotes:

1. Article 19 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

Yes, the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments [1], indicates that the following cannot be directors, shareholders or administrators of a bank in formation:

• Members of the Monetary Board, Guatemala´s Central Bank and the Superintendence of Banks executives that are involved in their analysis and approval process;
• Minors;
• The bankrupt or insolvent, while they haven’t been rehabilitated
• The recognized defaulted debtor;
• The directors and administrators of banks in liquidation and termination processes as result of a mandate of the Monetary Board or Superintendence of Banks;
• The convicted of fraudulent bankrupt;
• The convicted of crimes related to lack of honesty or integrity;
• The convicted for anti-money laundering crimes;
• The disqualified to exercise public servers or to act as director in banking and financial entities; and
• The legally incapable for any reason.

Footnotes:

1. Article 13 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

No, there aren´t only the above stated restrictions apply.

No, the same regime applies to all banks.

The Superintendence of Banks can impose the following fines, regardless of any other preventive measures which are considered as necessary for the adjustment of the operations to the conditions and limits legally established [1].

For banks, financial entities, and foreign banks the following sanctions apply:

• The first infraction, a sanction equivalent to 500.00 to 40,000 units of fine depending on the severity of the infraction;
• The second infraction of the same nature of an already sanctioned act, the sanction will be of the doble of fine units imposed on the first infraction;
• The third infraction of the same nature of an already sanctioned act, the sanction will be of the doble of fine units imposed on the second infraction.

For other companies of a financial group that their specific laws do not regulate sanctions for these infractions, a sanction of 100 to 10,000 fine units, depending on the severity of the infraction, will be imposed.

The value of each “fine unit” is of US$ 1.00 or its equivalent amount in Quetzals [2].

Footnotes:

1. Article 99 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments
2. Article 103 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

In accordance with the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments, for closing banks agencies and branches of foreign banks in the country, a written notice must be sent to the Superintendence of Banks one month prior to the closing date. If the entity is subject to a regularization plan, then the closing shall require the prior written authorization from the Superintendence of Banks [1].

Also, in accordance with the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments, special requirements and processes will apply if the resolution of a bank results from its merger with another bank, such as the prior report from the Superintendence of Banks and the approval of the Monetary Board.

Finally, if a bank continuously fails to comply with any of its legal obligations and/or any of the Superintendence instructions or a decrease occurs in a banks capital, then the banks shall present a regularization plan to the Superintendence of Banks for its approval. If the bank fails to present it and if other of the causes established in the law are incurred by the bank, the Monetary Board can suspend the bank’s operations and will appoint, prior receiving a proposal from the Superintendence of Banks, an Assets and Liabilities Exclusion Board, integrated with 3 members and will be in charge mainly of managing the bank and transferring the banks assets to a trust and other banks, as per the Superintendence of Banks instructions [2].

Footnotes:

1. Article 99 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments
2. Chapter III of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

The Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments creates the Fund for the Savings Protection (“FOPA” for its Spanish name) with the purpose to guarantee the depositor the recovery of the deposits for up to Q. 20,000.00 or its equivalent in foreign currency, for every individual person or company who owns deposits in a private or national bank or in a branch of a foreign bank.

The Assets and Liabilities Exclusion Board will send a report to the Monetary Board of the services renders and within 15 days after receiving said report, the Monetary Board can instruct the Superintendence of Banks to request a First Instance Court the bankrupt sentence of the bank and the First Instance Court shall issue the sentence within 5 days after receiving the request [1].

Footnotes:

1. Title X of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

Yes, in the face of equity deficiencies, practices that endanger its solvency and liquidity, Repeated non-compliance with the applicable legal and regulatory provisions, or legal reserve deficiencies, the banks are required to present a regularization plan to the Regulator [1]. Once the plan has been approved by the Regulator the Bank may not pay dividends or grant loans to its shareholders, general manager or to companies linked or related to it. Said plan must include some if not all of the following measures:

1. The reduction of assets, contingencies and/or the suspension of operations subject to capital requirements;
2. The capitalization of reserves and/or profits necessary to cover equity deficiencies;
3. The increase in authorized capital and the issuance of shares in the amount necessary to cover equity deficiencies;
4. Payment with its own shares to its creditors, with their consent;
5. Contracting one or more subordinated loans within the bank’s capital structure;
6. The sale in public offering of a number of shares of the bank or financial company that, placed at their nominal value or at one
   different, allow to correct totally or partially, as the case may be, the patrimonial deficiency, observing the provisions of article
   19 of this Law. If the bank or finance company does not have sufficient authorized capital to issue the amount of shares
   required, then, the authorized capital will be understood to be automatically increased by operation of law, in the amount that may be
   necessary to cover the deficiency; and,
7. The alienation or negotiation of assets and/or liabilities [2].

Footnotes:

1. Article 73 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments
2. Article 70 of the Banks and Financial Groups Law, Decree 19-2002 of the Congress, and its amendments

No, Guatemalan law does not contemplate a TLAC requirement.

In the past 5 years we have seen an increase in the electronic or digital services offered by the banks, from opening a deposits account directly at the bank’s website to app’s available for smartphones and through which the users can pay services or make immediate transfers between their accounts or to different bank’s accounts.

The banks are also offering a wider range of products through their website and are encouraging their clients to use their apps instead of contacting the banks call centers or visiting their agencies. Also, the credit cards are evolving from physical to digital cards and with a broad range of benefits.

Guatemala’s banking rules and regulation are traditional and even though they do not allow for an open banking business for example, they do accept for banks to improve the form in which they render their services to their clients.

The slow rhythm to catch up with the latest world-wide financial trends and the lack of laws that reflect the new changes in the sector, which will allow for the financial institutions to provide services in the new fintech era but without unprotecting their customers and their savings.