Financial Crime World

Here is the rewritten article in Markdown format:

Andorra’s Financial Watchdog Granted Widest Enforcement Powers

Andorra’s financial watchdog, INAF, has been granted the widest enforcement powers to ensure the stability of the country’s banking sector. These powers enable INAF to restrict or limit a bank’s business and operations, request divestment of activities posing excessive risks, and more.

Enforcement Issues and Resolution

In recent years, the main enforcement issues in Andorra have been:

  • Increasing default ratio (NPL ratio) of local banks
  • Compliance with anti-money laundering laws
  • Judicial proceedings against unfair terms in consumer contracts

While these issues are significant, they pale in comparison to those faced by other jurisdictions.

Government Takeovers

Andorran law allows for government takeovers of troubled banks. The INAF can impose a moratorium on a bank’s activities or even liquidate it if necessary. This power is used sparingly and only as a last resort.

Manager and Director Liability

In the event of a bank failure, managers and directors may face personal liability for their actions. Civil, criminal, and administrative penalties can be imposed, including:

  • Pecuniary sanctions
  • Removal from office
  • Disqualification from future directorship roles

Resolution Planning Exercises

Andorran banks are required to conduct regular resolution planning exercises to ensure they have a plan in place to address potential insolvency situations. This plan must outline the bank’s strategy for addressing the crisis, ensure business continuity, and identify necessary financing requirements.

Capital Adequacy Requirements

Andorran banks are subject to minimum capital adequacy and liquidity ratios. They must maintain own resources of at least 10% and have a minimum share capital of €30 million. The INAF has the power to impose additional measures if a bank’s own funds fall below these levels.

Contingent Capital Arrangements

Andorran banks are not explicitly required to make contingent capital arrangements, but they must have solid strategies and procedures in place to evaluate their capital adequacy on an ongoing basis.

As Andorra’s financial sector continues to evolve, the INAF will remain a crucial player in ensuring the stability and integrity of the country’s banking system. Its wide-ranging enforcement powers will be used to protect depositors, maintain confidence in the financial system, and prevent future crises.