Banking Law Reformed To Step Up Compliance

The Law on Modernization and Strengthening of Paraguayan Financial System Regulations (Law 5,787/16) modified the previous banking law in the following key ways:

Initial vetting for establishment of financial entities. The Paraguayan Central Bank ("BCP") may reject applications to establish banks and other financial institutions when it is not fully satisfied with the suitability of the project or the profile of the directors, administrators or auditors, taking into account the profile of the shareholders and origin of its capital funding. Transparency regarding final beneficiaries. The BCP may request information regarding any shareholder of a financial entity, up to the final beneficiary of a corporate entity shareholder. Prohibition on serving as president, director, manager, accountant or auditor of a financial entity for those who: have been convicted of intentional crimes, have been sanctioned by local or international financial regulators for poor professional performance, or have a conflict of interest that could affect the entity's proper functioning. The BCP's Superintendent of Banking ("SB") may also demand that individuals who incur any of these infractions while serving in one of those roles step down from their position. It makes the president and board of directors of financial entities liable for: approving operations and adopting agreements that conflict with applicable laws, failing to implement efficient policies and procedures for risk management and corporate governance, noncompliance with BCP instructions, failure to provide timely information to the SB in the correct...