On December 30, 2024, Law No. 1232 “Law on the Administration of the Monetary and Financial System” was published in Nicaragua with the aim of establishing the regulatory framework for the administration of Nicaragua’s monetary and financial system. This Law applies both to the entities responsible for the administration of the system and to the regulated and supervised institutions.
I- Structure of the Law
Monetary System Law is divided into six main sections:
- Administration of the Monetary and Financial System.
- Common provisions applicable to the Central Bank and Superintendency.
- Central Bank of Nicaragua.
- Superintendency of Banks and other financial institutions.
- Infringements, fines and appeals.
- Transitional and final provisions.
II- Main changes introduced by the Law
The most relevant modifications in the regulation and supervision of the financial sector are highlighted below:
- Creation of the Administration of the Monetary and Financial System
A new administration system is established, made up of three key entities:
- Monetary and Financial Board of Directors: highest strategic decision-making body.
- Central Bank of Nicaragua: responsible for monetary policy.
- Superintendency of Banks and Other Financial Institutions: responsible for the supervision of financial entities.
The Board of Directors is made up of the president of the Central Bank, the Superintendent of Banks, the Minister of Finance and Public Credit and four non-executive members. Its functions include the approval of regulations for financial stability, the authorization of new institutions and the definition of minimum capital requirements.
- Expression and settlement of obligations in córdobas
The law establishes that all obligations within Nicaraguan territory must be expressed and settled in córdobas, except for international operations, regulated financial transactions in foreign currency and securities issued in foreign currency. Clauses for maintaining value in accordance with the official exchange rate may be included.
Although this issue was covered by the Central Bank’s Organic Law, the new law reduces the exceptions applicable to the expression and settlement of obligations in córdobas. In addition, the resolutions that the Central Bank has published on this issue, clarifying or specifying certain aspects that affect its application, should be considered.
- Authorization of capital contributions and share transfers
Unlike the previous regulatory framework, any capital contribution or share transfer in supervised entities require authorization from the Superintendency of Banks, regardless of the percentage it represents in the respective entity’s capital stock. Similarly, the Superintendency must verify the legality of the origin of the funds.
- Consolidated supervision
Financial institutions with Nicaraguan capital that form part of national or international financial groups must establish their head offices in Nicaragua. This allows the Superintendency to exercise consolidated supervision over these financial groups.
- Infringements and fines
A new sanctions regime has been introduced with three levels of infringements (minor, moderate and serious):
- Financial institutions: Fines of between 0.001% and 0.5% of equity.
- Natural and legal people: Fines of between 0.01 and 100 units of the average minimum wage.
In the event of a repeat offense, the sanctions are doubled. Fines will be calculated based on the average minimum wage in the sector. The value of one fine unit corresponds to the national average minimum wage in force at the time the fine is imposed.
One issue to highlight is that sanctions and fines will be applied according to the criteria of proportionality and graduality in accordance with the seriousness of the infraction, the significance of the act, the offender’s record and the potential or actual damage caused.
- Obligation to provide information
The Law extends the obligation to supply information to any natural or legal person resident in Nicaragua, without limiting it to the statistical information requested by the Central Bank in the exercise of the powers conferred by the previous Organic Law. Under the new Law, the Central Bank and the Superintendency may request economic, financial, statistical and regulatory information, and must maintain the confidentiality of the information collected.
- Dismissal of personnel
The powers of the Superintendency to dismiss directors, managers and employees of financial institutions in the event of serious infractions are extended. Temporary or permanent bans on working in the financial sector may also be imposed.
- Repeals
The Monetary System Law repeals the following previous regulations:
- Law No. 732, Organic Law of the Central Bank of Nicaragua.
- Law N° 316, Law of the Superintendency of Banks and other Financial Institutions.
III- Conclusion
Law No. 1232 establishes a new administrative structure for Nicaragua’s monetary and financial system, extending the regulatory powers of the Central Bank and the Superintendency of Banks. According to the new law, the institutions that make up this system will maintain organic, functional, administrative and financial autonomy, but must coordinate their activities adequately in order to ensure the well-being of the national economy.