Nicaragua Enforces New Regulations for Financial Institutions
The Nicaraguan government has recently published new regulations for financial institutions operating in the country, aimed at ensuring compliance with international standards and safeguarding the stability of the financial system.
Authorization Requirements
According to a recent publication in La Gaceta No.150 and 151, the following types of financial corporations must obtain authorization from the respective regulatory body:
- Financial corporations
- General bonded warehouses
- Stock exchanges
- Stockbrokers
- Management companies of investment funds
- Fund management companies of securitization
- Central securities depository
- Clearing and settlement companies
- Entities operating with electronic money
- Special regimen financial companies
These institutions must also be constituted in the country as corporations or by branches of entities legally constituted abroad.
Capital Allocation Requirements for Non-Banking Financial Institutions
Non-banking financial institutions established in foreign countries must allocate capital to their branches in Nicaragua, which must be effectively paid and transferred in the country. Additionally, these institutions are prohibited from placing loans based on the capital and reserves of the parent company.
Insurance Sector Regulations
The insurance sector is also subject to regulations outlined in Law No. 733, General Law for Insurance, Reinsurance, and Bonds, published in La Gaceta No.162, 163, and 164 of August 25, 26, and 27, 2010.
- Foreign insurance companies may establish branches in Nicaragua, but they must be authorized by the respective regulator.
- Natural or legal persons domiciled in Nicaragua are prohibited from buying insurance from companies without proper authorization to operate in Nicaragua, except for export and import transportation, or accidental damage that may occur outside of Nicaragua.
Market Access and National Treatment
The regulations also apply to other financial services subsectors, including market access and national treatment. Nicaragua reserves the right to adopt or maintain measures requiring the incorporation in Nicaragua of financial institutions organized under the laws of foreign countries, excluding those seeking to operate as banks or insurance companies within Nicaragua.
Special Benefits for Public Entities and State-Owned Financial Institutions
The country also reserves the right to accord benefits to financial institutions or public entities wholly or majority owned by the State that supply financial services and are established with a public interest purpose. Such benefits may include:
- Extension of State guarantees
- Tax exemptions
- Exceptions to the usual juridical form requirements
- Exceptions to the legal requirements to begin operations
These benefits shall not disadvantage the core operations of commercial competitors.
Goals and Objectives
The new regulations aim to ensure the stability and integrity of Nicaragua’s financial system while promoting foreign investment and trade. By enforcing these measures, the government hopes to promote a more stable and secure environment for financial institutions operating in the country.