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Capital and Financial Market Alert - September 2024

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September 19, 2024

Amendments to Law No. 26702, General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance (the “LGSF”).

By means of Legislative Decree No. 1646 (the “Legislative Decree”), published in the Official Gazette El Peruano on September 13 of the current year, the LGSF was amended in order to (i) reduce the minimum capital required for transport companies, custody and cash management companies (“ETCAN”) that provide services to companies supervised by the Superintendency of Banking, Insurance and Private Pension Fund Administrators (the “SBS”), and (ii) simplify the rules regarding the concentration operating limits applicable to companies of the financial system (“ESF”).

In this regard, the Legislative Decree contains, among others, the following provisions:

Reduces to S/ 7'782,600 the base figure for determining the minimum capital stock for the establishment of ETCAN, as well as the base period for calculating the updated amount corresponding to such minimum capital.
Amends various articles of Title II, Limits and Prohibitions, of Section II, Financial System, of the LGSF, regarding concentration operating limits for SFEs, as described below:

The maximum limit of financing that an SFE may give to its directors and employees, as well as to their spouses and relatives, is modified and is now set at 10% of the effective Tier 1 equity (comprised of concepts such as paid-in capital, legal reserves, supplementary capital premium and others provided for in the LGSF characterized by their permanence and loss absorption capacity) (“PE-N1”),
The maximum limit of financing that an ESF may provide to related parties is reduced to 25% of PE-N1,
The concept of “large exposure” is introduced, which occurs when the financing granted by an SFE to a counterparty or group of counterparties connected by a single risk is equal to or exceeds 10% of the PE-N1 of said SFE, and the SBS is empowered to establish a maximum limit to the total amount of large exposures,
The maximum limit for financing granted to a counterparty or group of counterparties connected by single risk is set at 15% of the PE-N1 of the ESFs, and at 25% of the PE-N1 in case the increase is constituted by exposures covered with eligible guarantees or corresponding to exposures with ESFs in the country or abroad,
The method for calculating the fine for non-compliance with operating limits is modified, and,
Various operating limits established in articles 205 to 209, 211 and 213 of the LGSF are repealed.

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Amendments to Law No. 26702, General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance (the “LGSF”).