Superintendence of Banks, Insurance Companies and Pension Fund Managers (Peru)

Superintendencia de Banca, Seguros y AFPs (SBS)

Country

Location

Regulated area

Peru

Lima

Banking

Useful pages on the regulator website

Key regulation

  • Law No. 26702 which approved the Banking and Insurance Act of 1996
  • Supreme Decree No. 004-98 and Law 29903 which governs the private pension fund system 

Key individuals

  • Socorro Heysen, Head of the SBS
  • Jorge Mogrovejo, Intendent of Banking and Microfinance
  • Carlos Izaguirre, Intendent of Insurance Companies
  • Elio Sánchez, Intendent of Pension Fund Managers
  • Mila Guillén, Intendent of Legal Matters (General Counsel)
  • Sergio Espinosa, Head of Financial Intelligence (anti-money laundering system)

Regulatory oversight

The SBS is the regulatory authority charged with the implementation and enforcement of the requirements contained in the Peruvian Banking and Insurance Law approved by Law No. 26702 and, more generally, with the regulation and supervision of all banking and insurance companies in Peru. Since July 2005, it also oversees the activities of private pension fund managers.

The main objectives of the SBS are protecting the public interest in connection with the financial and insurance systems; safeguarding the financial stability of the institutions over which it has authority; and imposing sanctions on entities and individuals for breaches of the applicable regulations.

Its main responsibilities include:

  • granting authorisations for entering into the business of banking, insurance and private pension fund management;
  • prudential supervision of the daily operations of all types of banking entities, insurance companies and private pension fund managers;
  • overseeing mergers, dissolutions and reorganisations of all types of banking entities, insurance companies and private pension fund managers;
  • consolidated supervision of financial conglomerates;
  • reviewing the by-laws and amendments thereto of these companies;
  • setting forth criteria governing the transfer of bank shares, when permitted by law, for the valuation of assets and liabilities and for minimum capital requirements;
  • controlling the Central de Riesgos (Bank Risk Assessment Centre), to which all banks are legally required to provide information regarding all businesses and individuals with whom they deal without regard to the amount of credit risk (the information provided is made available to all banks to allow them to monitor individual borrowers’ overall exposure to Peru’s financial system); and
  • supervising the anti-money laundering system through the financial intelligence unit.

The SBS enforces the Banking and Insurance Law on an ongoing basis through periodic resolutions. The Banking and Insurance Law provides for stringent loan loss reserve standards, brings asset risk weighing in line with the Basel Committee on Banking Supervision guidelines and provides the SBS with powers of supervision over the holding companies of financial institutions.

The SBS is also responsible for conducting on-site examinations of banks on an annual basis, implementing the provisions of the Banking and Insurance Law and other related legislation, examining all banking and insurance operations, and analysing the relationship between assets, liabilities, net worth, profit and loss accounts and all other factors affecting a bank’s financial structure.

Reporting and disclosure obligations

The SBS requires banks to report, on a periodic basis, all relevant information necessary for the off-site evaluation of their financial performance. The relevant information for off-site evaluation includes audited financial statements on a consolidated basis, board of director reports, auditor reports and any other reports that reflect the operation of a bank’s business. Under current practice, such reporting is required on a daily, weekly, monthly, quarterly and semi-annual basis, depending on the nature of the reported information.

Monetary sanctions and recent behaviour

The SBS has the power to impose monetary sanctions on banks for an array of infractions, the most common ones being those related to reporting delays. The highest fine we have seen the SBS impose on a bank was approximately US$9 million. Although certain infractions are sanctioned with a predefined amount of fine that could be as high as approximately US$150,000, in the case of the most serious infractions, such as executing a transaction that is forbidden or lending in excess of the legal lending limit, the amount of the fine would only be limited by the value of such forbidden activity or a percentage of the excess. More specifically, a bank carrying on forbidden activities such as granting credit to finance political activities, granting guaranty support in favour of a non-banking lender or granting collateral over its fixed assets may induce a fine equal to the value of such prohibited activities imposed on it. We have seen fines for these activities that ran to several million US dollars. In the case of an excess in legal lending limits, the fine would be calculated at 1.5 times the market average interest rate spread over the first 30 days, and this will increase by 50% for each subsequent month until the excess is corrected. These sanctions are enforced by the SBS.

Although it is uncommon for banks to litigate with the SBS in court, there are cases, especially when fines are material, when the SBS has been sued by banks before the courts to avoid them paying those fines.

Non-monetary sanctioning powers and behaviour

The SBS may impose non-monetary sanctions on banks and also on bank managers and board members. The range of sanctions runs from warnings to licence cancellation or an intervention in a bank. Individuals may be forced out of their management positions or off boards, or they may even be declared unfit to work at any bank ever again.

The SBS has used its sanctioning powers to intervene and close banks and other types of financial entities.

Recent and upcoming developments

In January 2020, the President issued Urgent Decree 013-2020, which covers an array of measures intended to facilitate access to financing for small companies. Most importantly, this law:

  • regulates crowdfunding platforms;
  • corrects some legal issues that were limiting the growth of the factoring market;
  • establishes that leasing companies holding assets below a certain threshold may operate without requiring a regulatory licence (which shall otherwise be obtained from the SBS);
  • creates a government investment fund with an initial mandate for investing in start-up businesses; and
  • authorises the SBS to implement regulatory sandboxes that will allow a controlled environment for innovating new products and services.

Challenges

The SBS permanently encounters the following structural challenges:

  • high levels of informality (and money laundering) and low levels of financial intermediation as a percentage of gross domestic product;
  • high concentration of the banking sector, where the four largest banks account for 83% of total private banking assets; and
  • savings and loan cooperatives that were largely unsupervised in Peru until 1 January 2019, when Law No. 30822 entered in effect and the SBS was granted the authority to supervise all 438 savings and loan cooperatives in Peru.

Interacting with the regulator

The SBS is deemed to be a very technical government agency while SBS officers are well regarded professionals. The Peruvian financial system is quite small – there are only 18 licensed banks – so the SBS is generally in close contact with bank managers.

For purposes of interacting with the SBS, the most relevant departments are the Banking Intendancy (or the Insurance or Administrator of Pension Funds (AFP) Intendancies), the Risk Intendancy and the Legal Intendancy. The Banking Intendancy will assign officers to act as relationship managers with each bank who will become the point of contact for day-to-day interactions between banks and the SBS.

It is customary for banks to schedule regular visits to the Head of the Banking Intendancy and any of the other intendancies, as well as with the Head of the SBS, not only when disclosing incidents of non-compliance but also to discuss any developments, plans and concerns, as well as for meetings to discuss proposed legislation.

Formal consultations are also customary, as are written letters from the Head of the SBS directed to all banks that contain guidelines or instructions regarding specific matters and situations.

Notes for foreign investors

To obtain the corresponding licences or authorisations to operate a bank in Peru (among other types of regulated entities supervised by the SBS), a Peruvian company will need to be incorporated. Notwithstanding, there are generally no ownership restrictions or similar limitations that would bar foreign entities from owning shares in these companies.

Foreign banks may appoint a Peruvian representative (commonly referred to as representative office) and register it with the SBS. A representative office is not authorised to conduct banking activities in Peru, but it may carry out promotional activities for purposes of marketing international banking products and cross-border services of foreign banks.

Other regulators it works closely with

  • Banco Central de Reserva (BCR): Central Reserve Bank
  • Superintendencia del Mercado de Valores (SMV): Superintendency of the Securities Market
  • Instituto Nacional de Defensa del Consumidor y de la Propiedad Intelectual (Indecopi): National Consumer Protection Agency

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