Banking Industry Compliance Challenges in Guatemala: A Growing Concern

Impact of COVID-19 on Guatemala’s Economy

The COVID-19 pandemic has brought about significant changes to Guatemala’s economy, leading credit rating agencies to raise the country’s rating due to its resilient economy and long-standing macroeconomic stability. In recent months, inflation expectations have decreased, with an annual inflation rate of 8.32% in April 2023. The Bank of Guatemala raised interest rates to 5% in April 2023, aiming to control inflation.

Banking and Financial System Oversight

The Guatemalan banking and financial system is subject to oversight from the Banking Superintendence (SIB), which supervises compliance with laws and regulations to prevent asset laundering and financing of terrorism. The SIB also monitors the activities of:

• 18 banks
• 11 financial companies
• Other entities, including insurance companies, exchange houses, and credit card companies

Compliance Challenges in the Banking Industry

Despite these efforts, the banking industry is facing several challenges in terms of compliance. With a growing number of financial institutions operating in the country, there is a need for greater oversight to ensure that they are adhering to regulatory requirements.

• The SIB’s Special Verification Intendancy (IVE) and Guatemalan Financial Intelligence Unit are working to prevent money laundering and terrorist financing.
• Total net assets of GTQ486,323 million as of 2022 have been reported by the banking system, driven by growth in credits, investments, and availabilities.

Legislative Developments

Guatemala is undergoing a transition towards electronic procedures in its civil and commercial justice system, which will enhance the efficiency of the courts. Recent amendments to the Code of Civil and Commercial Procedure aim to promote faster response times from the court system.

Additionally, new legislation aimed at improving economic and investment conditions has been introduced, including:

• A new Leasing Act
• An Act to Promote Investment of Foreign Capital
• An Insolvency Act that overhauls judicial procedures for default and bankruptcy
• Amendments to the Free Trade Zones Act to simplify administrative procedures and requirements

Opportunities and Challenges for Businesses in Guatemala

These developments present opportunities and challenges for businesses operating in Guatemala, requiring specialized knowledge and skills to navigate the complex regulatory landscape. The Banking and Finance Practice Group at Mayora & Mayora is well-equipped to provide clients with the support they need to succeed in these types of projects.