Banking Regulatory Framework in Guatemala

Capital Requirements

In Guatemala, banking institutions are required to maintain a minimum level of capital to ensure their stability and solvency. The following types of capital are recognized:

• Primary Capital: Includes:
  • Paid-in capital
  • Legal reserve
  • Permanent reserves from retained profits
  • Other permanent capital contributions
  • State contributions
• Complementary Capital: Includes:
  • Profits from the current period
  • Profits from previous periods
  • Surplus from asset revaluation
  • Other capital reserves
  • Debt instruments convertible to stock
  • Subordinate debt for more than five years
  • Bonds combining characteristics of debt and capital
  • Other components determined by the Monetary Board

Patrimonial Position

A bank’s patrimonial position is the difference between its computable patrimony (assets minus liabilities) and its required patrimony. If a bank’s computable patrimony is lower than its required patrimony, there is a patrimonial deficiency.

• Computable Patrimony: Must not be lower than required patrimony.
• Patrimonial Deficiency: Triggers the procedure for patrimonial regularization when the difference between computable and required patrimony exceeds 50% of the required legal patrimony.

Insolvency, Recovery, and Resolution

The Monetary Board may immediately suspend a bank’s operations if:

• The bank has suspended payment of its obligations.
• The patrimonial deficiency is higher than 50% of the required legal patrimony.

A bank suspension entails the following effects:

• Suspension of all judicial procedures or cautionary measures against the bank.
• The bank may not contract new obligations.
• Suspension of enforceability of the bank’s liabilities.
• Suspension of interest accrual on the bank’s debts.

Regularization Plan

When a bank is subject to a patrimonial deficiency, it must notify the Superintendencia de Bancos (SIB) and present a regularization plan for its approval. The plan must include at least one or all of the following measures:

• Reduction of assets, contingencies, or suspension of operations subject to patrimonial requirement.
• 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.
• The contracting of one or more subordinated credits within the bank’s capital structure.
• Sale in public offer of shares for total or partial solution of patrimonial deficiency.
• Sale or negotiation of assets and liabilities.