On Tuesday, February 25, 2025, Law No. 1237, Law of Reforms and Additions to Law No. 561, General Law of Banks, Non-Banking Financial Institutions and Financial Groups, was published in La Gaceta, Diario Oficial No. 37. The reform introduces significant changes in the regulation of the financial sector, and according to its content, its objective is to strengthen the stability and supervision of financial institutions in the country.
I- Main reforms
- Capital requirements: New initial capital and capital adequacy requirements are established for banks, adjusting their loss absorption capacity. The minimum share capital of a national bank or branch of a foreign bank will be C$500,000,000.00.
- Shareholder transparency: incorporates the duty of information to all bank shareholders, regardless of their shareholding percentage.
- Capital buffers: Adds three new capital buffers:
- Capital conservation buffer: 2.5% of risk-weighted assets.
- Temporary countercyclical capital buffer: 2.5% of risk-weighted assets.
- Systemic risk buffer: 3% of risk-weighted assets.
- Regulation of systemically important entities: Introduces new provisions on systemically important institutions, consolidated supervision of financial groups, recovery and resolution plans, and stress tests.
- Supervision and dissolution: Strengthens the role of Superintendency in dissolution and liquidation processes, ensuring orderly closures.
- Shareholder liability: The majority of shareholders will be liable for their personal assets in resolution and liquidation processes.
- Incorporation of new supervised entities: The scope of supervision of the Superintendency is extended to savings and credit cooperatives and financial technology providers in intermediation and financing.
- Corporate governance: At least 30% of the directors and alternate directors are required to be independent.
- Protection of deposits: The amount protected against seizure of savings deposits of individuals is increased to C$370,000.00.
- Limits on interest rates and other charges: The Superintendency may establish limits on interest rates, commissions and other financial charges for prudential reasons.
- Limitations on credit transactions: Restrictions on credit transactions with related and unrelated parties are extended.
- Prohibition of unsecured loans: The provision of unsecured financing is prohibited.
- Updating of credit bureaus: The regulation is reinforced so that credit bureaus update credit records once users have settled their obligations.
- Sanctions regime: The sanctions regime is modified, establishing fines of between 0.001% and 0.5% of the equity of the entities, while for managers, officials and employees, the sanctions will range from 2 to 6 times their monthly salary.
- Capital requirements: New initial capital and capital adequacy requirements are established for banks, adjusting their loss absorption capacity. The minimum share capital of a national bank or branch of a foreign bank will be C$500,000,000.00.
II- Impact and considerations
The reforms aim to increase transparency, solidity and protection for financial users. Supervised institutions must adjust their capital structures, corporate governance and compliance processes to the new provisions.
We recommend that supervised financial sector entities assess the impact of these reforms and take the necessary measures for their timely implementation.
Link to the Reform: https://www.lagaceta.gob.ni/la-gaceta-no-37-martes-25-de-febrero-de-2025/