General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
June 08, 2018

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Guatemala. Directors welcomed the soundness of the financial sector. Nevertheless, there remains a need to further develop macro-prudential policies and move toward Basel III standards, implement consolidated supervision, reinforce bank resolution, and strengthen the AML/CFT framework.

The staff report notes that the financial system is sound and well-regulated while vulnerabilities seem manageable. Banks are well-capitalized, appear to have sufficient liquidity, and have low non-performing loans (NPLs). The staff stress test results indicate that sharp increases in interest rates or severe liquidity shocks in the U.S. dollar funding markets could challenge banks’ resilience, although such shocks would be absorbed within available capital and liquidity buffers. Banks remain exposed to exchange-rate-related credit and funding risk. The report highlighted various measures that could further modernize the financial sector:

  • Guatemala should gradually move toward Basel III standards. The authorities could also strengthen the macro-prudential framework by developing systemic risk indicators and by designating, and clearly defining, the responsibility for macro-prudential regulations. Developing macro-prudential policies, implementing consolidated supervision, and reinforcing the bank resolution are all important steps to increase financial sector resiliency. 
  • The new banking law that is being considered by Congress merits support and would strengthen the bank resolution framework and reinforce depositor protection. The legislation would create greater clarity on the triggers for resolution as well as provide safeguards for the use of public funds.
  • The recently adopted laws on microcredit, collateral, and the securitization of accounts receivable are important steps toward fostering financial development and inclusion.
  • Strengthening the AML/CFT framework will help maintain the access of domestic banks to the international financial system and will support efforts against corruption.

The selected issues report examines banking sector vulnerabilities and resilience to shocks. The results of the stress tests to Guatemalan banks’ solvency and liquidity positions suggest that the financial sector is exposed to very severe liquidity shocks in U.S. dollars, but is well-prepared to absorb a range of shocks with available buffers. The capital adequacy ratio for the banking system was 15% as of September 2017, well above the 10% minimum regulatory requirements. The identified vulnerabilities could be mitigated by introducing capital requirements for market risks and adopting the Basel III liquidity coverage ratio in U.S. dollars. The top-down solvency stress test includes credit risk, through an aggregate NPL shock as well as differentiated sectoral shocks; market risk, through interest and exchange rate risk; contagion risk, through interbank exposure; and a set of reverse tests. The reverse test indicates that system-wide NPLs would need to increase substantially for the system-wide CAR to fall below minimum requirements. The liquidity stress test models a simple liquidity drain that affects all banks in the system proportionally to each bank’s liquidity holdings.

 

Related Links

Keywords: Americas, Guatemala, Banking, Article IV, NPLs, Basel III, Macro-prudential Policy, AML/CFT, Stress Testing, Capital Adequacy, IMF

Related Articles
News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 22, 2019 WebPage Regulatory News
News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News
News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News
News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News
News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News
News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News
News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News
News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News
News

ISDA Publishes Statement on FRTB Implementation in Emerging Markets

ISDA published a statement that outlines challenges in implementation of the new Basel III market risk standard for banks in emerging markets.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2929