Título V. Prohibiciones y limitaciones

Banks are prohibited from:

a.Carrying out operations involving financing for speculation purposes, in consonance with the provisions of Article 342 of the Criminal Code;

b.Granting financing to pay, directly or indirectly, totally or partially, for the subscription of the shares of the bank itself, of another bank or, as applicable, of the companies that make up its financial group;

c.Admitting as collateral or acquiring its own shares;

d.Acquiring or retaining ownership of immovable property or movable property that is not necessary for the use of the entity, except when extraordinary assets are adjudicated to them or those that are destined for financial leasing operations, in accordance with this Law;

e.Transferring under any title, the property, credits or securities of the same entity to its shareholders, directors, officers and employees, as well as to the individual or juridical persons related to such persons. Solely excepted are bonds and securities issued by the entity itself when they are acquired on the same terms offered to the public and shares when they are purchased on the same terms granted to other shareholders;

f.Undertaking commercial, agricultural, industrial and mining activities or others that are not compatible with its banking nature, and participating in any form, directly or indirectly, in companies engaged in such activities;

g.Simulating financial operations and service provision; and,

h.Carrying out other operations and providing financial services that the Monetary Board considers incompatible with the banking business.

The companies of the financial group are prohibited from:

a)Granting direct or indirect financing for the acquisition of shares representing its capital, of the controlling company, of the responsible company or of any other financial company of the group to which it belongs;

b)Carrying out financial operations or service provision operations among themselves, under conditions of term, rates, amounts, guarantees and commissions different from those used in similar operations with third parties. The Monetary Board shall regulate the operations that such entities may carry out among themselves; and,

c)Carrying out operations and providing financial services that the Monetary Board considers incompatible with the financial business.

The creditor or collection agent is prohibited from oppressing, annoying or abusing a person insistently and repeatedly, on the occasion of the management of collection of a debt. For such purpose, the following shall be considered acts of harassment or intimidation:

a)Making communications for collection or payment demand by means of telephone calls, text messages, emails or any other analogous means, on non-business days and at non-business hours.

b)Making more than two communications during the day, for collection or payment demand, by means of telephone calls, text messages, emails or any other analogous means.

c)Communicating, for collection purposes, to persons other than the debtor or those who guarantee them.

d)Posting notices on poles and dwellings near the residence or workplace of the user, or on electric power poles, for the purpose of causing shame so that payments are made.

Abusive practices in connection with collection by banks and financial groups, management companies, collection agencies or others that carry out such activities on their behalf, including independent professionals, are prohibited. Collection efforts shall be conducted only with debtors and those who guarantee them, and therefore may not be directed to persons other than those already indicated. Likewise, harassment and intimidation practices for the collection of receivables are prohibited in accordance with what the preceding article provides for such purpose.

Banks, financial companies, as well as off-place entities or off shore entities and companies specialized in financial services that form part of financial groups, with the exception of the financial operations that they may carry out, without any limitation, in securities issued by the Ministry of Public Finance or the Bank of Guatemala, may not carry out operations involving direct or indirect financing of any nature, regardless of the legal form they adopt, such as, but not limited to, bonds, promissory notes, obligations and/or credits, nor grant guarantees or avals, which in the aggregate exceed the following percentages:

a)Fifteen percent (15%) of the computable patrimony to a single natural person or legal person, of a private character, or to a single company or entity of the State or autonomous entity. Transient excesses derived from interbank deposits of an operational nature or from the deposits and investments that the companies of the financial group may have in the bank of their financial group are excepted from this limit.

b)Thirty percent (30%) of the computable patrimony to two or more persons related to each other that form part of a risk unit.

c)Thirty percent (30%) of the computable patrimony to two or more linked persons, who shall be considered as a single risk unit. Said percentage may be increased up to fifty percent (50%) of the computable patrimony, if the excess is constituted by credit assets fully guaranteed, during the term of the credit, with time deposit certificates or financial promissory notes issued by the institution itself, which shall remain in the custody thereof. In addition, it shall be agreed in writing that, in the event the debtor is sued as defendant or incurs in noncompliance, without further proceedings, the guarantee shall be enforced.

The deposits and investments that the companies of the financial group maintain in the bank of their financial group shall not be counted for purposes of the limits established in this item.

d)Thirty percent (30%) of the computable patrimony in investments made by the off-place entities or off shore entities in securities representing sovereign debt of countries other than Guatemala, in accordance with the scale of limits established by the Monetary Board based on the sovereign risk rating granted by risk rating agencies recognized by the Securities and Exchange Commission of the United States of America (Securities and Exchange Commission -SEC-).

e)One hundred percent (100%) of the computable patrimony, to the aggregate of investments made by banks or financial companies in securities representing sovereign debt of countries other than Guatemala, which have the highest sovereign risk rating which, on an investment-grade scale, is granted by risk rating agencies recognized by the Securities and Exchange Commission of the United States of America (Securities and Exchange Commission -SEC-).

When the entities exceed the limits established in this article, they shall immediately deduct said excess from their computable patrimony, without prejudice to being sanctioned in accordance with this Law.

For purposes of the provisions of this Law, the following definitions are established:

1.Related persons: They are two or more natural or legal persons independent from the entity granting them the financing, but that maintain a direct or indirect relationship between themselves, by reason of ownership, management or any other relationship of any nature defined by the Monetary Board.

2.Linked person: It is the natural or legal person, directly or indirectly related to the entity granting it the financing, by reason of ownership, management or any other relationship of any nature defined by the Monetary Board.

3.Risk unit: It is constituted by two or more related or linked persons that receive and/or maintain financing from an entity. The Superintendency of Banks shall presume the existence of risk units based on criteria that include reasons of ownership, management, joint business strategies and other elements duly substantiated by the Superintendency of Banks.

The financing to linked persons, granted by the entities referred to in this article, shall be approved by its Board of Directors, or whoever acts in its stead.

The Monetary Board, upon proposal of the Superintendency of Banks, shall regulate the provisions of this article.

Banks may compute as organization expenses up to five percent (5%) of the initial paid-in capital. Such expenses must be amortized within a period of no more than five years.

The Monetary Board shall, in a general manner, regulate matters concerning limiting or regulating transactions entered into by banks with their shareholders, directors, officers and employees, and with individual or juridical persons linked to those indicated above, through ownership and/or management relationships.

The Superintendency of Banks, observing due process, may limit, for banks, financial companies and offshore entities or offshore entities, the distribution of dividends, under any modality or form that such dividends may adopt, when in the judgment of said body and as a prudential measure it is necessary to strengthen the liquidity and/or solvency of the respective bank, financial company or offshore entity. Said limitation shall not be applicable to limited-voting shares with preferred dividends.