Banks Must Comply with Information Requests for Tax Purposes
In an effort to enhance tax supervision and ensure compliance with financial regulations, Guatemalan authorities have clarified that banks must provide information related to local and foreign bank accounts, movements, transactions, investments, assets, or other operations and services carried out by individuals or entities whenever there is reasonable doubt regarding activities which may merit investigation.
Clarification on Information Requests
The clarification comes as part of the country’s efforts to strengthen its financial sector and prevent tax evasion. According to the Tax Code, requests for information must be authorized by a judge, and the SAT (Superintendency of Taxes) may appeal if the judge denies the request.
Consequences of Non-Compliance
Banks that fail to comply with valid court orders to provide information are subject to criminal penalties for resisting tax supervision.
Prudential Regime
The Guatemalan financial regulator, the Monetary Board, has also issued guidelines governing the prudential regime for banks. This includes requirements for capital adequacy, liquidity, and risk control.
Capital Adequacy
Banks must maintain a minimum amount of patrimony in relation to their exposure to risks, which may not be lower than 10% of their assets and contingencies. The required minimums and risk considerations are determined by the Monetary Board and are based on international best practices.
Definition of Computable Patrimony
A bank’s computable patrimony is defined as the sum of primary capital plus complementary capital, minus stock investments in various kinds of financial companies when they represent at least 25% of the bank’s capital. Primary capital includes paid-in capital, legal reserve, permanent reserves from retained profits, and other permanent capital contributions.
Insolvency, Recovery, and Resolution
In the event of a patrimonial deficiency or insolvency, banks must notify the Superintendency of Banks (SIB) and present a regularization plan for its approval. The SIB may approve, reject, or amend the bank’s proposal in either case.
Measures to Address Patrimonial Deficiencies
The plan must include at least one or all of the following measures:
- Reduction of assets, contingencies, or suspension of operations subject to patrimonial requirements;
- Capitalization of reserves or profits to cover patrimonial deficiencies;
- Increase of authorized capital and issue of shares to cover patrimonial deficiencies;
- Payment to creditors with the bank’s own stock, with their consent;
- Contracting of subordinated credits within the bank’s capital structure;
- Sale in public offer of shares for total or partial solution of patrimonial deficiency; and
- Sale or negotiation of assets and liabilities.
Additional Requirements
In addition, banks must present a regularization plan when the SIB detects:
- Repeated non-compliance with legal and regulatory obligations;
- Deficiencies in legal reserve;
- Management practices that place liquidity and solvency in grave danger;
- Filing of financial information that is untrue or contains false documentation.
Monetary Board Intervention
The Monetary Board may also suspend a bank’s operations in cases of patrimonial deficiency, non-compliance with regularization plans, or grave causes substantiated by the SIB.