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Guatemala Enacts Fixed Minimum Coverage for Depositors

The Guatemalan government has introduced a new regulation aimed at providing financial protection to depositors in the country’s banking system.

New Regulation Details

Under the new law, the Financial Protection Agency (FOPA) will cover up to GTQ20,000 (approximately USD2,500) per individual or entity with deposits in a private Guatemalan bank or a branch of a foreign bank. The coverage amount may be modified by the Monetary Board when the percentage of deposit accounts, the balances of which are lower than or equal to the amount of coverage in effect, is less than 90% of the total deposit accounts in the banks. Notably, joint accounts shall be considered opened by only one individual or entity.

Exceptions to Coverage

The coverage does not extend to individuals or entities linked to the bank in question or to its shareholders, directors, managers, sub-managers, legal representatives and other officers.

Bank Secrecy Requirements

The Banks and Financial Groups Act prohibits all directors, managers, legal representatives, officials and employees of banks from disclosing confidential information about customers. The law also requires banks to maintain accurate records of customer transactions and to prevent unauthorized access to such information.

Insolvency, Recovery and Resolution

In the event of a bank’s insolvency, the Guatemalan government has established a framework for resolution and suspension of failing banks. When a bank experiences patrimonial deficiency, it must notify the Superintendency of Banks (SIB) and present a regularisation plan for its approval.

The plan must include at least one or more measures to address the deficiency, such as: * Reduction of assets or liabilities * Capitalization of reserves or profits * Increase of authorized capital * Payment to creditors with the bank’s own stock * Contracting of subordinated credits * Sale in public offer of shares * Sale or negotiation of assets and liabilities

Impact on Banking System

The new regulation is expected to enhance confidence in Guatemala’s banking system by providing a safety net for depositors. It also aims to promote sound banking practices and prevent the misuse of confidential customer information.

In conclusion, the Guatemalan government’s introduction of fixed minimum coverage for depositors marks an important step towards strengthening the country’s financial stability and protecting the interests of consumers.