Título III. Estabilizacion Monetaria

Bank deposits are subject to a bank reserve requirement, which shall be calculated, in national or foreign currency, as a percentage of the totality of such deposits. This bank reserve requirement must be maintained at all times in the form of demand deposits (deposits payable on demand) at the Bank of Guatemala, of cash funds in the vaults of the Banks, and, when circumstances so warrant, of liquid investments in securities, documents or instruments of value, national or foreign, in accordance with the regulations issued for that purpose by the Monetary Board.

Likewise, other liability, contingent or service operations carried out by the banks are subject to the bank reserve requirement, including operations arising from trusts in which a Bank participates as trustee, when, through such operations, in the judgment of the Monetary Board, following a report from the Superintendency of Banks, the bank reserve requirement is being evaded.

The bank reserve requirement is not subject to attachment.

The liability, contingent or service operations carried out by entities that, without being a bank, form part of a financial group, as well as financial companies subject to the oversight and inspection of the Superintendency of Banks that do not form part of a financial group, shall be subject to a legal deposit when the Monetary Board, upon prior report from the Superintendency of Banks, deems that such operations constitute the taking of financial resources of a nature similar to those indicated in the preceding article. Said legal deposit shall be calculated in national or foreign currency, as a percentage of the total amount of said operations, which must be maintained at all times in the form of demand deposits at the Bank of Guatemala, or of liquid investments in securities, documents or instruments, whether national or foreign, in accordance with the regulations issued for that purpose by the Monetary Board.

The legal deposit is not subject to attachment.

The Monetary Board shall regulate, in a general and uniform manner, the bank reserve requirement and the legal deposit. The regulation must fundamentally contain the following aspects:

a)Composition and form of constitution in national currency or in foreign currency;

b)Percentage. When the Monetary Board determines the modification thereof, such modification shall be applied gradually and shall be notified with prudent advance notice;

c)Computation base;

d)Computation period, which may not be less than fourteen (14) calendar days;

e)Position, for the calculation of which the entities concerned may normally offset the deficiencies in the reserve requirement or legal deposit, on one or more days of the computation period, against the excesses in the reserve requirement or legal deposit, as applicable;

f)Limits on the intensity or frequency of deficiencies in the reserve requirement or legal deposit in the computation period; and,

g)Remuneration, when the Monetary Board deems it appropriate, of a part or of the whole of the reserve requirement or the legal deposit. In no case may it be greater than the weighted average passive rate prevailing in the banking market.

The Bank of Guatemala may issue monetary stabilization bonds or other securities, place them and acquire them in the market, as well as receive term deposits, in both national currency and foreign currency.

For the issuance of monetary stabilization bonds or other securities, the Bank of Guatemala must have the prior approval of the Congress of the Republic.

The Bank of Guatemala may also carry out open market operations solely in the secondary securities market, through the trading of securities issued by the Ministry of Public Finance, by decentralized or autonomous entities, by municipalities, or by other public sector issuers, which securities must, for such purpose, be defined as eligible by the Monetary Board.

The estimate of the cost that the Bank of Guatemala will incur for the implementation of monetary, exchange rate and credit policy, arising from the issuance of bonds or securities or from the receipt of term deposits, must be included in the Budget of Revenues and Expenditures of the institution, which is approved annually by the Monetary Board in accordance with subparagraph g) of Article 26 of this Law.

Matters pertaining to the cost referred to in the preceding paragraph must be reported semiannually to the Congress of the Republic by the Bank of Guatemala.

The Bank of Guatemala may buy or sell foreign currency.