The Superintendence of the Financial System (SSF) has established different rules and regulations to supervise financial entities wishing to operate in El Salvador. One of these sets of rules pertains to the requirements that foreign banks must meet to obtain the necessary authorization and open a branch in Salvadoran territory.
The Technical Standards for the Establishment of Branches of Foreign Banks have been designed with the purpose of outlining the requirements and procedures that foreign banks must follow to obtain approval from the SSF and, consequently, establish a branch in El Salvador.
The main objective is to ensure that branches comply with both international and local financial operating standards, as well as to guarantee the protection of the public’s interests.
“The process of establishing a branch of a foreign bank in El Salvador involves submitting a written application addressed to the SSF. This application must include a series of documents and information, such as the articles of incorporation and statutes of the bank’s parent company, an internationally recognized risk rating certifying the quality of the parent company, an economic-financial feasibility study, among others.”
Other documents that the applicant must submit include:
- Proof of the bank’s legality in the country of origin
- Agreement from the parent company authorizing the establishment of the branch
- Financial statements from the last five years
- Report from the supervisory authority of the parent company regarding its financial situation
- Ratings from the last five years issued by internationally recognized rating agencies
- Report on compliance with information security management and business continuity
- Current audit report
Our partner, Luis Domínguez, comments that “the process of establishing a branch of a foreign bank in El Salvador is rigorous and is designed to ensure the financial strength and responsibility of the institutions operating in the country.”
Once the authorization request is received, the Superintendence will proceed to verify compliance with the requirements. A period of 90 days is established from the date of submission of the request to issue the authorization or deny it regarding the establishment of branches of foreign banks.
“The Central Reserve Bank also provides its opinion on the request, ensuring joint supervision and greater transparency in the process,” says Luis.
Furthermore, the Central Reserve Bank also provides its opinion on the request, ensuring joint supervision and greater transparency in the process. According to our expert, if all conditions are met and the financial and legal soundness of the bank is verified, authorization for the establishment of the branch is granted.
“The opening of branches of foreign banks in El Salvador will not only promote competition and diversification in the financial sector, but will also offer Salvadoran citizens a wider range of banking services and products,” says Domínguez.