A. M. 
With the purpose of safeguarding the stability of the country’s banking system, the Legislative Assembly approved, with 56 votes in favor, the Law for the Stability of the Financial System and Guarantee of Deposits. This law seeks to regulate the recovery and resolution processes of financial institutions in difficulties, granting new powers to the Superintendencia del Sistema Financiero (SSF) as the regulatory entity.
In the 31st plenary session, the legislators pointed out that the law will guarantee the continuity of essential financial services and protect the rights of depositors in case of problems in any financial institution. It is also intended to foster users’ confidence in the banking system, assuring them that their savings will be safeguarded, which in turn will promote competition in interest rates.
The regulations, consisting of 121 articles, will be applicable to banks governed by the Banking Law (except for the Banco de Fomento Agropecuario), savings and loan companies, cooperative banks and cooperative associations in the process of gradual adaptation.
Committee to face financial crises
The law also establishes the creation of a Financial Stability Committee, in charge of coordinating actions to face possible crises in the financial system. This committee will be integrated by representatives of the Banco Central de Reserva (BCR), the Ministerio de Hacienda, the Superintendencia del Sistema Financiero (SSF) and the Instituto de Garantía de Depósitos (IGD).
Its functions include monitoring systemic risks, issuing recommendations to mitigate potential threats and implementing the necessary administrative measures to face contingencies.
Plans to mitigate risks and guarantee stability
The regulations, consisting of 121 articles, will be applicable to banks governed by the Banking Law (except Banco de Fomento Agropecuario), savings and loan companies, cooperative banks and cooperative associations in the process of gradual adaptation.
Each financial institution must design and update a recovery plan, detailing the measures to strengthen its financial situation in case of deterioration. This plan must be approved internally and submitted to the SSF within a set period of time.
In the event that an entity needs to exit the financial system, the law contemplates a resolution process to minimize the impact on economic stability. This procedure will seek to ensure the continuity of essential functions or, if necessary, facilitate an orderly exit from the market.
The Banco Central de Reserva will be authorized to grant financing to banks, savings and loan companies and cooperative entities to address liquidity problems, preventing a specific crisis from affecting the system as a whole.
Supervision and continuity of essential services
As the highest resolution authority, the SSF will be responsible for protecting public deposits and ensuring the uninterrupted provision of critical financial services. This will help to reinforce user confidence and preserve the soundness of the national banking system.
