Andorran Financial Authority Exercises Disciplinary Power, Oversees Banking Sector
Strengthening Stability and Efficiency
The Andorran Financial Authority (AFA) has been granted discretionary powers to conduct investigations and on-site inspections of Andorran banks, as well as impose administrative penalties for breaches of financial legislation. According to Article 20 of Act No. 10/2013, the AFA is also authorized to engage in international cooperation with other regulators, including Spain, through a bilateral agreement.
Regulatory Powers
The AFA’s regulatory powers extend to overseeing the country’s banking sector, ensuring that banks operate in a manner consistent with good governance practices and comply with relevant regulations. The authority is responsible for:
- Monitoring the financial situation of individual banks
- Identifying potential risks or vulnerabilities that could impact their stability
- Conducting investigations and on-site inspections
- Imposing administrative penalties for breaches of financial legislation
Bank Management and Directors’ Liability
In the event of a bank failure, managers and directors may incur personal liability for any damages caused by their actions. This liability can take various forms, including:
- Civil sanctions
- Criminal sanctions
- Administrative sanctions
The AFA has been empowered to impose penalties on bank officials who fail to comply with regulations or engage in unethical practices.
Resolution Planning Exercises
Banks operating in Andorra are required to draft an action plan, also known as a “living will,” in the event of insolvency. This plan outlines measures to restore the bank’s position and must be accompanied by a specific implementation schedule.
The AFA has also mandated that banks develop:
- Debt restructuring plans
- Reorganization of activities plans
to ensure their long-term viability in the event of financial difficulties.
International Cooperation
The Andorran government has signed bilateral agreements with Spain to facilitate international cooperation on financial matters. This cooperation aims to:
- Strengthen the stability and efficiency of the Andorran financial sector
- Promote good governance practices among banks operating in the country
Under these agreements, the AFA is authorized to engage in regular information exchange with Spanish regulatory authorities, enabling both countries to monitor potential risks or vulnerabilities that could impact the stability of their respective financial sectors.