The Legislative Assembly of El Salvador approved during the last week of November 2024 the ‘Law for the Stability of the Financial System and Deposit Guarantee’. This legislation aims to strengthen the country’s banking system and instill confidence amongs users of banks, savings and credit societies, banks and cooperative associations.   

Law objectives 

The new law grants the Financial System Superintendency (SSF) to exercise as a resolution and monitoring authority over the entities regulated under this law. It will also serve to protect public deposits, maintain the continuity of financial services and guarantee the stability of the financial system.  

Additionally, the law promotes greater transparency in how depositor funds are managed and where money resides. Also, encourages increased competition in interest rates, benefiting users. Thus, all these upcoming reforms will apply to the following entities: 

  • banks regulated by the Banking Law, except the Agricultural Development Bank (BFA). 
  • savings and credit societies regulated by the Law on Savings and Credit Societies.  
  • cooperative banks regulated by the Cooperative Banks Act.  
  • cooperative associations in the process of phasing in compliance.  

Establishment of the Financial Stability Committee 

A significant feature of the law is the establishment of the Financial Stability Committee, which will coordinate national financial institutions during crises. This commitee will include representatives from:

  • Central Reserve Bank (BCR)
  • Financial System Superintendency (SSF)
  • Ministry of Finance
  • Deposit Guarantee Institute (IGD).

The commitee will be resposible for developing recovery plans for financial institutions facing distress. These plans must be approved by the management bodies of each institution withing 10 days before the submission to the SSF.

Additionally, the law mandates the creation of resolution plans, preventive measures designed to facilitate the orderly exit of failing financial institutions without destabilizing the system. With these measures, El Salvador aims to enhance financial sector resilience and streamline regulatory procedures, ensuring a safer and more transparent financial environment.

Auxadi is an expert firm in offering financial services to multinational groups and funds. In this way, we offer you more than 45 years of experience in accounting in El Salvador and in more than 50 countries around the world. 

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All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.