Through Law No. 6,104, enacted on July 3, 2018, the organic law of the Central Bank of Paraguay ("BCP") was amended, establishing a series of regulations aimed at improving compliance in the financial sector.
New Exceptions to the Duty of Confidentiality
For example, according to the new wording of Article 7, besides the exceptions set forth in special laws, the prohibition of disclosing third parties’ information, data and documents held by BCP are exempted in following cases: b) Reports requested by judicial authorities in a trial where the affected party is part, adopting the pertinent measures to guarantee confidentiality; c) The information required by the General Comptroller of the Republic exercising its duties; d) Information referring to credit institutions declared in bankruptcy; e) Information requested by the Chambers of Congress and joint investigation commissions; and f) Other information, data and documents that by virtue of laws, such as Law No. 5.282 / 14 "On Access to Public Information", are deemed public.
Moreover, under Article 8, the BCP can now report the economic and financial situation of Paraguayan banks and financial institutions to the agencies responsible for the supervision and resolution of foreign banks and finance companies, as long as there is reciprocity and the foreign authorities are subject to the secrecy duty in similar conditions.
New Limitations for Management Positions in the BCP
In addition, article 13 was modified setting forth that the following persons can neither be appointed as President nor Directors of the BCP: a) People suspended from the exercise of citizenship, which, for example, occurs when a person is criminally convicted; b) People related to each other within the fourth degree in blood and the second degree in affinity; c) People with a restriction to sell or encumber assets, or people who are in the process of call for creditors or bankrupt; d) Those who do not have the capacity to trade or who were declared as such by law; e) Those convicted of intentional punishable acts; and f) Those judicially disqualified to hold public positions.
Moreover, Article 14 now determines that the following persons can neither be appointed as President nor Director of the BCP: a) Shareholders, directors, managers or employees of banking entities or other entities that are subject to the control of the supervisory bodies of the BCP; and b) Any person directly related, whether commercially, economically or professionally to activities that could generate conflicts of interests in the decision making process of the BCP’s Board of Directors, as long as the links remain valid.
Likewise, according to article 17, the President and the Directors of the BCP must leave their positions: c) Due to poor performance in their functions; and d) Due to the commission of an intentional punishable act. On the other hand, according to Article 18, if these people are imprisoned for intentional punishable acts, they get suspended in their functions.
New attributions of the BCP’s Board of Directors
According to article 19, among other things, now the BCP can:
26) Regulate and determine parameters of prudence, such as comprehensive risk management, good administration, inspection, management, and other aspects that banks and financial institutions must observe;
27) Through general regulations, set forth good corporate governance conditions for banks, financial institutions, credit houses, lenders and others;
29) Set forth the conditions to grant and revoke licenses, regulate, supervise and sanction: a) credit houses and lenders; and b) entities that by other laws may be understood to be subject of supervision and regulation of the BCP.
31) Set forth minimum requirements for people or companies that provide services inherent to financial businesses and that have an impact on the operational risk of banks, financial institutions and other regulated entities, as well as the requirements for permanence, temporary suspension and the exclusion of persons from the regulated system; and
32) Establish a public registry of sanctions applied by the BCP, the Superintendence of Banks and the Superintendence of Insurance.
New Incompatibilities for BCP Officials
According to the new wording of article 29, a BCP official cannot be director, manager, shareholder, administrator, employee or consultant of any person or company supervised by the BCP.
New Rules of Order and Discipline
According to the amendment inserted in Article 89, the following are deemed major offences for banks, financial and other subjects supervised by the BCP:
1) Habitually exercising activities not contained in the authorization to operate or in the bylaws;
2) Performing acts without prior authorization from the BCP or without observing the established basic conditions;
6) Lacking the independent accountants’ report in the form and term established by the BCP;
7) Omitting mandatory information or providing incomplete or false information to the BCP;
9) Excusing, refusing or resisting to act, and to comply with instructions or requirements of the Superintendence of Banks, the supervisors or inspectors, or failing to provide documents requested by them;
10) Not complying with the temporary limitations or prohibitions imposed to the entity;
12) Breaching corrective measures, legal or regulatory obligations required by the Superintendence of Banks or the BCP;
13) Breaching accounting duties or carrying it with substantial anomalies that prevent or make difficult to know the economic, patrimonial and financial situation of the entity, as well as breaching the obligation of holding books and accounting records or auditing accounts;
14) Having deficiencies in the administrative organization, accounting or internal control procedures, including those related to risk management, when said deficiencies endanger the solvency or viability of the supervised entity;
15) Not notifying to the shareholder’ meeting, the Board of Directors, the entity's corporate comptroller, or to its parent company, of a sanction imposed by the BCP;
16) Breaching the duty of truth in information provided to the BCP, clients and the general public; and
17) Performing prohibited acts or operations.
On the other hand, according to Article 90, any transgression of the laws and regulations of the BCP not amounting to a major offense is considered a minor infraction.
According to Article 91, both the supervised companies and their presidents, directors, legal representatives, managers, accountants, corporate comptrollers, internal auditors, external auditors and all those who exercise any management, administration or control position may be sanctioned by the BCP, unless they: a) show that they were not aware of the act or omission attributed to them, directly or indirectly; as well as that they could not have signs or information about the act or omission; or b) even if having knowledge of the act, they opposed its execution.
In turn, according to Article 93, entities can be sanctioned for faults committed by their employees or administrators. No entity can be exempted of liability for a negligent or willful misconduct of its administrators or employees.
According to Article 94, the following sanctions can be imposed: a) for major offences: (i) Limitation to exercise certain activities or operations; (ii) Temporary prohibition of dividends’ distribution or to open new offices for up to two fiscal years; (iii) A fine of up to approximately US$ 1,760,000; (iv) Suspension or disqualification of up to one year; and (v) Revocation of the operating authorization or license; b) for minor faults: (i) warning; and (ii) a fine of up to US$ 35,000 approximately.
Moreover, according to article 95, presidents, directors, legal representatives, managers, accountants, corporate comptrollers, internal auditors, external auditors and all those who hold management, administration or supervisory positions in supervised entities can be punished with: (i) warning; (ii) a fine of approximately US$ 176,000; (iii) removal of the position with disqualification to re-exercise it for up to 10 years; and (iii) cancellation of the corresponding registration.