Financial Crime World

GUATEMALA: Banking Regulations Compliance on the Rise

Guatemala’s financial services industry has undergone significant reforms since 2002, with a package of banking and regulatory laws and regulations being implemented between 2002-2004. The country’s securities and commodities markets have also seen updates to their regulatory framework, including the enactment of the Insurance Activity Law in 2010.

Key Regulations

According to José Augusto Toledo, partner at Arias & Muñoz, the most important laws and regulations applicable to financial institutions in Guatemala include:

  • Banks and Financial Groups Law
  • Private Finance Companies Law
  • Insurance Activity Law
  • General Bonded Warehouses Law
  • Securities and Commodities Market Law
  • Financial Supervision Law
  • Bank of Guatemala Organic Law
  • Monetary Law

Supervisory Body

The Banking Superintendence is responsible for supervising activity related to financial and insurance intermediation, among others. Local banks, branches of foreign banks, private finance companies, bonded warehouses, local insurance companies, foreign exchange dealers, off-shore banking institutions, credit card issuers, and financial groups are all subject to regulation.

Penalties

Hefty penalties, including fines and imprisonment, are provided for in laws dealing with regulated activities, such as:

  • Financial intermediation
  • Provision of authorized insurance
  • Legally offering securities to the public

Despite the country’s financial services industry being largely privately held, banks have been spared from the recent financial crisis due to regulation limiting their exposure to foreign risks. The legitimization of “off-shore banks” has also led to increased regulation, with these institutions now subject to the same obligations as local counterparts.

Competition

Competition is fierce in the banking market, with seven major banks having a combined market share of almost 90%. However, intermediation margins are still high, and local financial institutions are yet to achieve levels attractive to credit rating agencies.

Financing Expansion

To date, some of the biggest banks have financed their expansion through preferred share offerings or limited private- equity investments from reputable global financial institutions. As Guatemala continues to develop its financial services industry, it is clear that compliance with banking regulations will remain a top priority for institutions operating in the country.

Conclusion

In conclusion, Guatemala’s financial services industry has undergone significant reforms and updates to its regulatory framework. Compliance with banking regulations will continue to be a crucial aspect of doing business in the country. Financial institutions must ensure they are aware of and adhere to the relevant laws and regulations to maintain their credibility and avoid penalties.