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Treasury Rules Tighten the Purse Strings on Banking Sector

The country’s treasury has introduced new regulations to rein in generous remuneration and bonuses paid to bank board members and managers. Effective immediately, total payments must not exceed 50% of the same amount calculated over data from the preceding accounting period.

Promoting Transparency and Accountability

The move is aimed at promoting greater transparency and accountability within the banking sector. Under the new rules, any bank that exceeds this threshold will be required to provide justification for its actions before the fund’s technical committee, which may consider it reasonable in certain circumstances.

AML/KYC Requirements

Meanwhile, the country’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations have been clarified. The Act Against Laundering of Money and Other Assets, along with the Act to Prevent and Suppress Financing of Terrorism, require banks and other financial institutions to adopt robust AML/CFT programs.

Key Requirements

  • Procedures to ensure a high level of integrity in personnel
  • Permanent training for employees on AML/CFT responsibilities and obligations
  • Establishment of an audit mechanism to verify compliance with programs and rules
  • Formulation and implementation of specific measures to know and identify clients
  • Reporting of suspicious transactions to the IVE (Instituto de Vigilancia Economica)

Depositor Protection

The country’s depositor protection regime, administered by the Bank of Guatemala, has also been updated. The Fund for Protection of Savings (FOPA) guarantees depositors up to GTQ20,000 (approximately USD2,500) per individual or entity.

Coverage Limitations

  • Does not extend to individuals or entities linked to the bank in question or its shareholders, directors, managers, submanagers, legal representatives and other officers
  • Funded through mandatory monthly contributions from Guatemalan banks and branches of foreign banks, as well as yields from investments and other sources

Banking Confidentiality

The treasury has also clarified the rules governing banking confidentiality. Violations of this principle are considered a grave offense, entailing immediate removal and civil and criminal liabilities.

Prudential Regime

Finally, the treasury has introduced new regulations aimed at strengthening the prudential regime governing the banking sector. Banks must maintain a minimum amount of patrimony in relation to their exposure to risks, which may not be lower than 10% of assets and contingencies considered according to the risks under the Monetary Board regulations.

Capital, Liquidity, and Risk Control Requirements

The treasury has also updated its regulations on capital, liquidity, and related risk control requirements, with new rules aimed at promoting greater stability and resilience within the banking sector.