COSTA RICA Law and Practice Contributed by: Douglas Soto, Miguel Elizondo-Soto and Osvaldo Madrigal Méndez, Zurcher, Odio & Raven
a certain period. Once approved, such plan becomes mandatory for the institution. Progress reports on compliance might be requested by SUGEF, and can be accompanied by on-site verifications carried out by SUGEF. If SUGEF considers that the action or recovery plan is not adequate to remedy the financial situ - ation, it shall order the financial intermediary to make the relevant adjustments within a reason - able and non-extendable period. In accordance with the level of risk shown by the financial inter - mediary, SUGEF may require the institution to provide additional capital or any other corrective measures to remedy the deficiencies, including the possibility of requesting changes of staff members. For institutions on Level 3 of financial irregular - ity, CONASSIF shall order the intervention of the supervised institution and designate the interve - nors/administrators to assume the administra - tion of the institution. The administrators must present a plan for the financial regularisation of the institution within the term established by CONASSIF, or recommend its resolution. The Superintendent monitors the intervention pro - cess and ensures compliance with the condi - tions of intervention agreed upon by CONASSIF. Resolution Resolution is applicable to an entity under a Lev - el 3 irregularity or instability. CONASSIF is the resolution authority and, based on the recom - mendation of the controller, will apply the resolu - tion mechanism that best suits the situation, if the entity is considered non-viable. Resolution may combine one or more of the fol - lowing options: • the sale of the entity’s business;
• the exclusion and total or partial transfer of assets and liabilities to another solvent finan - cial entity or a bridge entity; • the exclusion and transfer of assets and liabil - ities to a trust or a special purpose vehicle; • internal recapitalisation – ie, the transforma - tion of liabilities into capital; and • any other option approved by CONASSIF. According to the legislation, the resolution regime will provide the resolution authority with the flexibility to apply different tools and mecha - nisms for resolving an insolvent financial entity, in order to maximise the value of the entity to protect its creditors, particularly depositors, as well as being at the lowest cost. The current resolution regime is the result of a legal update made by Costa Rica as part of the process to become a member of the OECD. Thus, both Financial Stability Board Key Attrib - utes of Effective Resolution Regimes and OECD recommendations were considered in updating the resolution legal framework. As part of this update, SUGEF was granted dis - cretionary intervention powers by extending the scope of its current intervention and sanctioning powers towards a cross-border and consolidat - ed supervision covering local, foreign and other group companies relating to information provi - sion, financial and capital requirements, and the authority to execute on-site inspections abroad.
9. ESG 9.1 ESG Requirements
There are no specific banking regulatory require - ments that involve ESG matters. However, in October 2021 the Congress passed a law that entitles financial entities and government agen -
126 CHAMBERS.COM
Powered by FlippingBook