PARAGUAY Law and Practice Contributed by: Juan Fiorio, Alejandra Corrales and Jean Saavedra, Fiorio, Cardozo & Alvarado
when owed to private entities. (c) Public entity deposits with guarantees: These are treated similarly to private deposits, following the same rules for minimum guarantees and linear distribu - tion if funds are limited. • Second-order obligations: These include financial debts owed by the entity to the Cen - tral Bank. • Third-order obligations: (a) non-financial obligations to the Central Bank; (b) claims by the Deposit Guarantee Fund (FGD), stemming from its contributions to securitisation mechanisms; and (c) tax obligations owed by the insolvent entity. This framework ensures that depositors have preferential access to any recoverable assets, protecting their funds in case of a bank’s insol - vency. Resolution No 8, Act 78, of 22 November 2018 outlines the guidelines for managing ESG risks for financial entities. The guidelines offer a com - prehensive framework for integrating ESG con - siderations into banking practices, creating a system for monitoring and addressing potential ESG-related risks. The key aspects of this reso - lution are: • Risk identification and classification: The guidelines mandate that financial institutions must identify, measure, evaluate, and control ESG risks. These risks are categorised into three levels: high, medium, and low, based 9. ESG 9.1 ESG Requirements
on the potential environmental and social impacts of the financed activities. • Due diligence and risk assessment: A com - prehensive due diligence process is required before extending credit. This includes assess - ing the client’s understanding and manage - ment of ESG risks, verifying compliance with environmental and social regulations, and identifying potential areas for improvement. The process should encompass all stages of credit operations – from selection and analy - sis through approval, monitoring, and review. • Risk management system (SARAS): Finan - cial institutions must implement a SARAS, a comprehensive risk management system. This system is designed to integrate ESG considerations into all aspects of lending and credit processes. A key element of SARAS is an ESG policy defining the institution’s com - mitment to environmental and social respon - sibility. • Reporting and transparency: Regular report - ing on ESG risk management is mandated. This includes periodic reports detailing risk identification, mitigation strategies, and out - comes. The level of detail and reporting fre - quency will vary depending on the risk profile of the client and the specific transaction. • Internal and external oversight: The guidelines emphasise the importance of internal audits to verify compliance with ESG risk manage - ment policies. The Superintendency of Banks will also periodically review the performance of financial institutions against these guide - lines. • Legal and regulatory compliance: Financial institutions are responsible for ensuring full compliance with all relevant national and international environmental and social laws and regulations. Obtaining the necessary permits and licenses is also a prerequisite for financing activities with potential signifi -
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