In December 2025, the Financial System Stability and Deposit Guarantee Law came into force in El Salvador. Its purpose is to regulate the preparation and execution of recovery and resolution processes for financial institutions, as well as the powers of the Superintendency of the Financial System. All of this serves a clear goal: to protect the stability of the financial system, the continuity of essential financial services and the rights of depositors of troubled institutions, with the public interest prevailing over private interests.
I- Who does the Financial System Stability Law apply to?
Under Article 2, the Law applies to:
- Banks regulated by the Banking Law or other special laws;
- Savings and loan companies, in accordance with the law that governs them.
The Law does not apply to banks that are not members of the Deposit Guarantee Institute, without prejudice to the provisions of their special laws.
II- More than a crisis law: a preventive approach
Although at first glance it may appear to be a law focused mainly on the recovery and resolution of distressed financial institutions, a broader reading shows that its provisions incorporate elements serving a more ambitious objective: strengthening the resilience of the financial system through preventive mechanisms, institutional coordination and corporate governance.
III- What is financial resilience?
Resilience can be understood as the ability of an institution — or of the financial system itself — to anticipate, withstand, adapt to and recover from adverse events without compromising the continuity of its essential functions. This notion is reflected in the Law itself, which defines Financial System Stability as the characteristic that allows the system to operate effectively despite adverse events, preserving public confidence and maintaining the normal performance of the economy. From this perspective, the Law does not merely regulate crisis scenarios: it establishes a set of tools designed to strengthen financial institutions’ capacity to face stress situations before they threaten the stability of the system.
IV- Corporate governance: the core of resilience
Indeed, a solid corporate governance framework contributes not only to investor protection and access to financing, but also to the sustainability and resilience of companies and even of the economy as a whole.
In this regard, one of the most relevant aspects of the Law is the responsibility it assigns to the management bodies of financial institutions for approving and updating a Recovery Plan. Resilience therefore ceases to be the supervisor’s responsibility and becomes a duty inherent to each institution’s governance. Each entity must prepare, approve and update that plan in line with its size, risk profile, importance within payment systems and impact on financial system stability, while meeting at all times the minimum requirements set out in the Law.
V- Recovery plans: prevention in practice
The recovery plans provided for in the Law reflect precisely this preventive vision and must include quantitative and qualitative indicators to be used as reference points for triggering the contemplated actions. In corporate governance terms, this means that management bodies must properly understand the institution’s risk profile, monitor how it evolves and make timely decisions to mitigate potential impacts.
It is also particularly significant that the Law empowers the Superintendency of the Financial System to require the strengthening of processes, systems, mechanisms and strategies relating to corporate governance, risk management and control, internal control and audit as recovery measures. This provision confirms the importance of corporate governance as a tool of financial resilience, and not merely as a set of corporate organisation requirements. Strengthening governance structures ceases to be an isolated objective and becomes an instrument for preserving the stability of institutions and protecting depositors’ interests.
The Law also incorporates mechanisms aimed at guaranteeing the continuity of essential financial services and the protection of depositors — objectives that reflect a comprehensive view of financial resilience.
VI- Conclusion: resilience as a pillar of financial stability
The Financial System Stability and Deposit Guarantee Law can be understood as legislation that evidences the close relationship between financial stability, risk management and corporate governance. Its structure reflects a shift from models centred exclusively on prudential supervision towards frameworks that recognise institutional preparedness, the responsibility of management bodies and inter-institutional coordination as fundamental pillars of financial resilience. The Law not only establishes mechanisms for facing crises; it also promotes conditions for financial institutions to develop internal capabilities enabling them to anticipate, withstand and overcome adverse scenarios, thereby contributing to stability and confidence in the financial system as a whole.
At Consortium Legal we advise banks, savings and loan companies and other participants in the financial system on adapting their corporate governance structures and preparing their recovery plans under the new Law. If you would like to assess your institution’s level of readiness, our Banking and Finance team in El Salvador is at your disposal.