Law of Institutions of the Banking Sector
Decree No. 1,402 of November 13, 2014 was published in Official Gazette No. 6,154 Extraordinary of November 19, 2014. Through said Decree, the President of the Republic enacted the Decree with the Status, Value, and Force of Law of Institutions of the Banking Sector (the “Decree-Law”), which establishes the legal framework for the incorporation, operation, supervision, inspection, control, regulation, monitoring, and penalization of the institutions that operate in the banking sector of Venezuela, whether public or private, or any other form of organization allowed by the Decree-Law.
The most relevant changes established in the Decree-Law with respect to the previous Law that formerly regulated this matter include:
a) A trend may be noticed to reduce the role that the Superior Body of the National Financing System (Órgano Superior del Sistema Financiero Nacional) formerly played.
b) The Decree-Law re-adopts a provision of former laws that regulated the same matter, with respect to the granting of credits or making of investments by individuals or corporations with their own funds, indicating that such individuals or corporations will not be a part of the banking sector, without prejudice to the supervisory and control powers of the Superintendence of Institutions of the Banking Sector (Superintendencia de las Instituciones del Sector Bancario - “SUDEBAN”), nor will they need any authorization to perform such activity.
c) In addition to microfinance banks, development banks are incorporated as a specialized banking institution. The main purpose of said banks will be to foster, finance, and promote the industrial and social development projects of the country, as well as economic and social activities for specific productive sectors.
d) Now, the individuals and corporations that render financial or ancillary services to the institutions of the banking sector will be a part of the banking sector; such institutions of the banking sector being understood as the companies that issue or manage credit, debit, prepaid cards and other financing or electronic payment cards.
e) The board of directors or the equivalent bodies in charge of the administration of banking institutions will be composed of at least seven (7) principal directors and their corresponding alternates, one third (1/3) of whom, of both principal and alternate directors, may not be shareholders, either directly or indirectly, of the banking institution.
f) Now, the institutions of the banking sector must give notice to SUDEBAN, prior to their appointment, of the persons who will be nominated to hold the offices of directors, presidents, legal representatives, counselors, treasurers, or similar offices.
g) The individuals or corporations that have a participation equal to or higher than twenty percent (20%) in an institution of the National Financial Sector may not be shareholders of another financial institution. The repealed law established a percentage of five percent (5%).
h) According to the relationship criteria prescribed in the Decree-Law, the establishment of financial groups, being understood as the group of banks, non-banking institutions, financial institutions, and other companies that constitute a unit of decision or management is forbidden. Likewise, the Boards of Directors of the institutions of the banking sector must file with SUDEBAN, a half-yearly statement indicating the participation of the bank and its shareholders in the corporate capital of other banks and non-banking institutions, in order to verify the existence or nonexistence of financial groups.
i) Capital stock increases arising from credit transactions made by shareholders with cash arising from international financing are allowed, but the international financing may not be guaranteed with shares of the bank in question, previously authorized by SUDEBAN.
j) Consumer credit was increased up to 15,500 Tax Units. The repealed law established a limit up to 7,500 Tax Units.
k) Given that the Decree-Law considers the financial lease as a credit, it also includes the definition of financial lease (which also appeared in former banking laws).
l) According to the relationship criteria provided in the Decree-Law, SUDEBAN may determine if there exists unity of decision or management when an institution of the banking sector has with respect to other enterprises or companies, or when individuals or corporations have with respect to the same institution of the banking sector: (a) direct or indirect participation equal to or higher than fifty percent (50%) of the capital; (b) control equal to or higher than a third (1/3) of the votes of the direction and management entities, whether by statutory or contractual clauses or otherwise. Natural or legal persons or entities that have a financial, organizational or legal relationship among them may also be considered related persons.
m) The private institutions of the banking sector must make contributions to the Bank Deposits Social Protection Fund (Fondo de Protección Social de los Depósitos Bancarios) on a monthly basis. The contributions must be available within the first five (5) business days of each month.
n) The opening of bank accounts, consumer credit transactions, credit for vehicles and mortgage credits for principal dwelling units are permitted to the shareholders and other persons that are part of the management or direction of the banking institution, as well as to the counselors, advisors, consultants, internal and external auditors, area managers, board secretaries, or similar positions, and to employees of the institution and of SUDEBAN.
o) The criterion is re-adopted that the balance sheet or statement of revenue and expenditure, in case of individuals, and the financial statements audited by independent public accountants, in the case of corporations, are to be filed for the granting of credits when the amount requested exceeds an amount equivalent to 4,000 Tax Units. Such requisite had been omitted in the repealed law.
p) SUDEBAN is granted the power to issue prudential rules on prevention and control of operations related to the crime of capital legalization and terrorism financing.
q) A penalty of imprisonment ranging from eight (8) to twelve (12) months is established for the persons who carry out financial, credit, and exchange intermediation, obtain resources from the public on a customary basis, or perform any activity expressly reserved to the institutions of the banking sector without authorization.
The Temporary Provisions of the Decree-Law provide as follows: (i) the institutions of the banking sector authorized by SUDEBAN will submit to SUDEBAN’s consideration a plan to adjust to the Decree-Law, if such were the case, which plan must be presented within 30 calendar days following the publication of the Decree-Law in the Official Gazette; (ii) the institutions that as of the date of the entry into force of the Decree-Law are in the process of assigning credit portfolios due to financial aid or assistance measures, intervention or liquidation, will have 180 days to complete the process of transfer; (iii) the provisions contained in the Decree-Law will be applicable to the banking institutions and their related legal persons that, as of the date of the entry into force of the Decree-Law, have not completed their corresponding administrative liquidation processes.
The final provisions of the Decree-Law establish the following: (i) the financial institutions of the communal and popular power incorporated under the legislation regulating such matter will be exempted from the application of the provisions of the Decree-Law; (ii) The Banco Nacional de Vivienda y Habitat (“BANAVIH”) will be under the supervision, inspection, control, regulation, and monitoring of SUDEBAN.
The following provisions are repealed: (i) the provisions of the Law of Trusts, published in Official Gazette No. 496 Extraordinary of August 17, 1956; (ii) all provisions of a legal and sub-legal status that conflict with the Decree-Law; (iii) the Decree with the Status, Value, and Force of Law of Partial Amendment to the Law of the Institutions of the Banking Sector, published in the Official Gazette No. 39,627 of March 2, 2011, and (iii) for the exercise of the supervisory and penalizing power of SUDEBAN, the Decree with the Status, Value, and Force of Law of the Regime of Housing and Habitat, published in Official Gazette No. 39,945 of June 15, 2012 was repealed with respect to the last paragraph of article 9, numbers 8 and 23 of article 12, number 8 of article 16, articles 88 and 90 with respect to the control, inspection, supervisory, and penalizing power of the application of the rules contained in the Law of the Regime of Housing and Habitat as referred to the compliance by the banking institutions with the mortgage portfolio.
The Decree-Law became effective on November 19, 2014.
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