Título I. Objetivo y los aspectos financieros y contables

The purpose of this Law is to regulate matters pertaining to the structure and functioning of the Bank of Guatemala referred to in Article 132 of the Political Constitution of the Republic of Guatemala.

The Bank of Guatemala, as the Central Bank of the Republic, which in the text of this Law may be referred to interchangeably as the Bank or the Central Bank, is a decentralized and autonomous entity, with legal personality and its own assets, with full capacity to acquire rights and assume obligations, of indefinite duration, and domiciled in the Department of Guatemala.

The fundamental objective of the Bank of Guatemala is to contribute to the creation and maintenance of the most favorable conditions for the orderly development of the national economy, for which purpose it shall foster the monetary, exchange and credit conditions that promote stability in the general price level.

The Bank of Guatemala has, among others that this Law may determine, the following functions:

a)To be the sole issuer of the national currency;

b)To endeavor to maintain an adequate level of liquidity in the banking system, through the use of the instruments provided for in this Law;

c)To endeavor to ensure the proper functioning of the payment system;

d)To receive on deposit the bank reserve requirements and the legal deposits referred to in this Law;

e)To administer the international monetary reserves, in accordance with the guidelines issued by the Monetary Board; and,

f)Any other functions compatible with its nature as a Central Bank that are assigned to it by legal mandate.

The functions referred to in this article shall be exercised without detriment to the attainment of the fundamental objective established in Article 3 of this Law.

The Bank of Guatemala has a Guarantee Fund constituted by the contribution made by the State for the creation of the Central Bank, by the capitalizations authorized up to the time this Law entered into force, and by the capital deriving from the Securities Regulation Fund, in accordance with the provisions of Article 75 of this Law.

The Guarantee Fund may be increased with the net surpluses referred to in subparagraph a) of Article 8 of this Law, as well as through contributions from the State.

The Guarantee Fund of the Bank of Guatemala is not transferable and is not subject to attachment.

The accounting period of the Central Bank shall correspond to the duration of the calendar year.

For each accounting period, the net surpluses or deficits of the Bank of Guatemala shall be determined by the sum of the income less the net operating expenses, received and incurred; such expenses shall include the cost arising from the implementation of the monetary, exchange rate and credit policy determined by the Monetary Board.

The net surpluses derived from the operations of the Bank of Guatemala, in any accounting period, shall be distributed in the following order:

a)A percentage of the net surpluses shall be allocated to increase the Guarantee Fund of the Central Bank, until reaching a level equivalent to five percent (5%) of the aggregate amount of the liabilities of the Central Bank at the end of the accounting period in which the surpluses were generated. For the purposes of this calculation, the aggregate amount of the liabilities of the Bank of Guatemala shall always be the sum of the balances of:

i)The National Currency (Numerario Nacional) account;

ii) The securities issued by the Bank of Guatemala that are in circulation;

iii) The term deposit certificates issued; and,

iv) The deposits held at the Bank of Guatemala.

b)Another percentage of the net surpluses shall be allocated to increase the general reserve of the Central Bank until reaching a level equivalent to the amount of the Guarantee Fund; the general reserve may be used only to offset net operating deficiencies of the Central Bank; and,

c)Any residual net surplus, after reaching the amounts established in subparagraphs a) and b) above, shall be transferred to the Executive Branch, through the Ministry of Public Finance, within the month following the end of the accounting period, which surplus shall become part of the General Budget of Revenues and Expenditures of the State for that fiscal year.

The distribution of the net surpluses of the Bank of Guatemala shall be decided by the Monetary Board in the month following the close of the accounting period.

If, after covering its operating expenses, the revenues of the Bank of Guatemala are not sufficient to cover the cost of implementing the monetary, exchange rate and credit policy determined by the Monetary Board, the resulting deficiency shall be applied in the following order:

a)Against the General Reserve account; and,

b)If the balance of the General Reserve account does not have sufficient resources or extraordinary assets to cover the net deficiencies in whole or in part, they shall be absorbed by the State. Within a time limit not exceeding thirty (30) days after the end of the accounting period concerned, the Monetary Board shall initiate the corresponding proceedings before the Executive Branch through the Ministry of Public Finance, so that the amount of the uncovered deficiencies is included in the draft General Budget of Revenues and Expenditures of the State for the following fiscal year. In such case, the Ministry of Public Finance shall provide for such net deficiencies to be covered with treasury bonds or other financial instruments available to said Ministry, which shall bear market interest rates and which may be traded by the Bank of Guatemala on the domestic or international secondary market.

The net surpluses or deficiencies of the Bank of Guatemala arising from the valuation of assets and liabilities expressed in foreign currencies, resulting from variations in the exchange rate of the Quetzal, shall not be considered part of operating income or expenses. Accordingly, they shall be recorded periodically and separately in accounts of the Balance Sheet called: "Asset Account for Exchange Rate Differentials" or "Liability Account for Exchange Rate Differentials," as applicable.

The net surpluses or deficiencies of the Bank of Guatemala arising from the valuation of monetary gold, which forms part of its assets, resulting from fluctuations in the international market prices of that metal, shall not be considered part of operating income or expenses. Accordingly, they shall likewise be recorded periodically in the accounts called "Asset Account for Asset Revaluation" or "Liability Account for Asset Revaluation," as applicable.

Upon closing of the accounting period, the balances of the Asset and Liability Accounts for Exchange Rate Differentials and for Asset Revaluation shall be offset against each other, and the net result shall be recorded in the "Valuation Reserves" account that forms part of the Balance Sheet of the Bank of Guatemala.

For the preparation of the financial statements of the Bank of Guatemala, generally accepted accounting standards and principles shall be observed, as well as the international standards adopted by the Monetary Board upon the proposal of the Superintendency of Banks.

The financial statements of the Bank of Guatemala shall be audited and certified annually by an external auditing firm of recognized experience and reputation, for which purpose the Monetary Board shall authorize its engagement.