The congress of Guatemala has been discussing Bill 5157, which contains amendments to Decree 19-2002 (Law of Banks and Financial Groups, or Ley de Bancos y Grupos Financieros). These amendments have the backing of the Ministry of Economy, the Monetary Board and the General Secretariat of the Presidency of the Republic.
While the Law of Banks and Financial Groups was last amended in 2013, there have been very few substantive modifications to this law. This derives from the fact that the Monetary Board regulates Guatemala's financial system through a series of regulations it approves and which are binding for financial institutions. Through Bill 5157 the executive branch seeks, with the approval of congress, to undertake substantive modifications to the Law of Banks and Financial Groups. These modifications, if approved, could have a substantial effect on the nation's financial system.
The proposed amendments include: a) the strengthening of banking supervision by adapting the treatment that the regulator gives to units of risk, as recommended by the Basel Committee; b) the incorporation and application of macro-prudential instruments to the capital adequacy of banks and financial institutions (this will require those entities to add further capital to the minimum percentage established in law (10%) to increase the resilience of the financial system to adverse shocks); and, c) the strengthening of the banking safety network to adapt it to the dynamism of the international financial markets. This is to be undertaken by providing additional instruments which allow the financial regulator to adequately address any adverse situations that may seriously affect the financial system.
While there is no means to determine if and when this bill passes, the effects of its approval may give way to a more dynamic and strengthened financial system in Guatemala.
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