PERU Law and Practice Contributed by: Andrés Kuan-Veng and Luis Ernesto Marín, Rubio Leguía Normand
amendments, financial system companies are also required to establish processes to evaluate the adequacy of their regulatory capital based on their risk profile. Boards of directors are now responsible for ensuring that companies main - tain regulatory capital levels above global limits and the additional buffers, consistent with their risk profile. Furthermore, the SBS was empow - ered to establish regulatory capital requirements for additional risks. Consequently, in December 2022, the SBS issued several resolutions to align Peru’s regula - tory framework with Basel III standards, without prejudice to modifications and new regulations that the SBS has continued to issue. Risk Management Rules Banks in Peru are subject to comprehensive risk management regulations covering opera - tional, credit, liquidity and market risks. The SBS requires financial institutions to implement inter - nal risk management systems proportional to their size, operational complexity and the nature of their activities, ensuring robust oversight and adherence to risk control practices. Quantity and Quality of Capital Requirements Following the amendments introduced by Legis - lative Decree No 1531, Peru’s capital adequacy requirements stipulate that banks must maintain a Common Equity Tier 1 (CET1) ratio of 4.5% of total risk-weighted assets (RWAs) and contin - gencies, a Tier 1 Capital ratio of 6% of RWAs, and a Total Capital Ratio of 10% of RWAs. In addition, financial system companies are required to maintain capital buffers, such as conservation buffers, countercyclical buffers and market concentration risk buffers, above the minimum requirements established by the Peruvian Banking Law. The conservation buffer
must represent at least 2.5% of RWAs and may be utilised under conditions set by the SBS. Furthermore, the SBS establishes additional Ordinary Tier 1 Capital requirements associated with countercyclical and market concentration risk buffers through general regulations. Liquidity Requirements In December 2023, the SBS approved a new Regulation for Liquidity Risk Management, which incorporated the net stable funding ratio (NSFR) to promote improved liquidity risk man - agement and to continue aligning the regulatory framework with Basel III standards. It is worth noting that previous liquidity risk man - agement regulations already included provisions related to the liquidity coverage ratio (LCR) to ensure that financial institutions maintain an adequate level of high-quality liquid assets (HQLAs). The new regulation requires institutions to manage liquidity risks in a manner consistent with their size, operational complexity, risk levels and systemic importance. Under this framework, financial institutions are responsible for implementing robust governance practices. These include daily calculations of liquidity ratios and liquid investment ratios and assigning specific responsibilities to their gov - ernance bodies to oversee liquidity risk manage - ment effectively. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework Peruvian banks are not subject to the regime of insolvency and bankruptcy otherwise applicable to Peruvian corporations in general. The legal and regulatory framework governing insolven -
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