Limits for banks
to invest abroad

New restrictions cover loans, bonds,
and preferred shares

The Central Bank (BDL) has issued a new circular stating that it will need to approve any direct or indirect contribution or partnership by banks in any financial foreign sector. This would include banks, financial institutions, brokerage companies, collective investment schemes, insurance companies or others.

The BDL defines indirect contributions or partnerships as the ones conducted by companies or investment funds, where the concerned bank owns stocks or shares in their capital.

Direct and indirect contributions or partnerships should mean subscriptions or direct and indirect investments in financial tools, such as loans, bonds, preferred shares and others, according to the BDL circular.

There are only two exemptions to approval by BDL: If the bank owns 20 percent or more of the total shares or stakes of the foreign banks or financial institutions willing to contribute or partner in the foreign financial sector with less than 20 percent of their capital. If the bank owns less than 20 percent of the total shares or stakes of the foreign banks or financial institutions willing to contribute or partner in the foreign financial sector regardless of the percentage of this contribution or partnership.

This circular modifies a previous basic circular, where any bank’s deposits, investments and loans at the foreign banks and financial institutions related to it, should not exceed 25 percent of its net basic capital.