Financial Crime World

INAF’s Enforced Regulation Brings Banking Sector in Line

Andorra, [Date] - The INAF (Institut Nacional d’Assistència Financera) has been enforcing strict regulations on Andorran banks to ensure they operate within the bounds of prudence and stability.

Key Issues in the Banking Sector

The principal enforcement issues in the banking sector have been:

  • Increase in non-performing loan (NPL) ratios
  • Compliance with anti-money laundering laws
  • Judicial proceedings related to unfair consumer contracts

Personal Liability for Bank Managers

In the event of a bank failure, managers or directors may face personal liability, including:

  • Civil sanctions for gross negligence or wilful misconduct leading to insolvency
  • Criminal sanctions for offenses such as false accounting, negligent management, or fraudulent transactions
  • Administrative sanctions, including pecuniary fines, removal from office, and disqualification from exercising management or directorship activities in failed entities

Resolution Planning Exercises

Andorran banks are required to conduct resolution planning exercises, which involve:

  • Drafting an action plan to address insolvency situations
  • Outlining measures to restore the bank’s position, including:
    • Strategy
    • Business operational continuity
    • Financing requirements
    • Necessary financing sources

Capital Adequacy Requirements

Andorran banks are subject to legal and regulatory capital adequacy requirements, which include:

  • Minimum solvency ratio of 10%
  • Solid strategies for evaluating and maintaining adequate share capital to cover the nature and level of risk they may be exposed to
  • Minimum share capital requirement of €30 million

Conclusion

The INAF’s strict regulatory oversight ensures that Andorran banks operate prudently and maintain adequate capital buffers to withstand potential shocks. The regulator’s enforcement powers are designed to prevent insolvency situations and ensure that managers or directors are held accountable for their actions. As the banking sector continues to evolve, it is essential that regulators like INAF remain vigilant in enforcing regulations to protect depositors’ interests and maintain public trust.