On February 25, 2025, Law No. 1237, “Amendment and Additions to Law No. 561, the General Banking Law, Non-Banking Financial Institutions, and Financial Groups,” was published in the Official Gazette. This reform, which took effect upon publication, introduces changes aimed at reinforcing the supervision and stability of the financial sector in Nicaragua.
Main changes introduced by the admendment
1- Expansion of financial supervision:
- Credit unions and financial technology companies engaged in intermediation and financing are now subject to regulation and supervision by the Superintendency of Banks and Other Financial Institutions (SIBOIF).
2- Stricter capital requirements:
- The minimum social capital for national banks and foreign bank branches has been increased from C$200,000,000.00 to C$500,000,000.00 (US $13,605,442.20).
3- New capital reserves:
- Three types of reserves are established:
- Capital conservation reserve: 2.5% of risk-weighted assets.
- Temporary countercyclical capital reserve: 2.5% of risk-weighted assets.
- Systemic risk reserve: 3% of risk-weighted assets, applicable to financial institutions with assets exceeding C$50,000,000,000.00 (US $1,360,214.00).
Other modifications
The amendments updates the elements that make up the capital calculation for supervised institutions. It also strengthens corporate governance provisions by establishing measures to improve risk prevention and management. Among these provisions, it is required that at least 30% of the directors of financial institutions be independent.
Regarding supervision, stress testing and risk-based supervision are strengthened to ensure continuous monitoring of the financial system’s stability.
Additionally, SIBOIF is authorized to set limits on interest rates, fees, and other financial charges applicable to the operations of supervised institutions.
Restrictions are also introduced on the granting of unsecured loans, allowing only those that do not exceed C$5,000,000.00 (US $136,054.42) and that have the authorization of SIBOIF. Non-compliance will result in penalties, and the full provision of the granted credit will be required.
Finally, the amendment establishes the obligation for supervised institutions to submit their contract models for SIBOIF approval before implementation.
carlos.tellez@garciabodan.com
Partner
García & Bodán
Nicaragua