Banking Regulation 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

CHAMBERS GLOBAL PRACTICE GUIDES

Definitive global law guides offering comparative analysis from top-ranked lawyers

Contributing Editor Johannes de Jong Osborne Clarke

Global Practice Guides

Banking Regulation Contributing Editor Johannes de Jong Osborne Clarke N.V.

2025

Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted.

GPG Director Katie Burrington Content Management Director Claire Oxborrow Content Manager Jonathan Mendelowitz Senior Content Reviewer Sally McGonigal, Ethne Withers

Content Reviewers Vivienne Button, Lawrence Garrett, Sean Marshall, Marianne Page, Heather Palomino, Deborah Sinclair, Stephen Dinkeldein and Adrian Ciechacki Content Coordination Manager Nancy Laidler Senior Content Coordinator Carla Cagnina Content Coordinators Delicia Tasinda and Hannah Leinmüller Head of Production Jasper John Production Coordinator Genevieve Sibayan

Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com

Contents

INTRODUCTION Contributed by Johannes de Jong, Osborne Clarke N.V. p.5

CZECH REPUBLIC Law and Practice p.153 Contributed by BBH, advokátní kancelář, s.r.o. Trends and Developments p.164 Contributed by BBH, advokátní kancelář, s.r.o.

ANDORRA Law and Practice p.10 Contributed by Cases & Lacambra

EGYPT Law and Practice p.171 Contributed by Matouk Bassiouny

AUSTRIA Trends and Developments p.26 Contributed by DLA Piper Weiss-Tessbach

FRANCE Law and Practice p.185

BRAZIL Law and Practice p.33

Contributed by Lacourte Raquin Tatar Trends and Developments p.205 Contributed by Kramer Levin Naftalis & Frankel

Contributed by Magalhães & Zettel Trends and Developments p.53 Contributed by Magalhães & Zettel BRITISH VIRGIN ISLANDS Law and Practice p.61 Contributed by Walkers

GREECE Law and Practice p.210

Contributed by Zepos & Yannopoulos Trends and Developments p.232 Contributed by Zepos & Yannopoulos IRELAND Law and Practice p.239 Contributed by Dillon Eustace LLP

BULGARIA Law and Practice p.70 Contributed by Penkov, Markov & Partners CHILE Law and Practice p.90 Contributed by Moraga & Cía. Trends and Developments p.105 Contributed by Moraga & Cía. COSTA RICA Law and Practice p.112 Contributed by Zurcher, Odio & Raven

JAPAN Law and Practice p.265 Contributed by Anderson Mori & Tomotsune Trends and Developments p.277 Contributed by Anderson Mori & Tomotsune KUWAIT Law and Practice p.283 Contributed by International Counsel Bureau – Lawyers and Legal Consultants Trends and Developments p.314 Contributed by International Counsel Bureau – Lawyers and Legal Consultants LIECHTENSTEIN Law and Practice p.319 Contributed by Schurti Partners Attorneys at Law Ltd

CYPRUS Law and Practice p.129

Contributed by Georgiades & Pelides Trends and Developments p.148 Contributed by Georgiades & Pelides

CHAMBERS.COM

Contents

LUXEMBOURG Trends and Developments p.339 Contributed by A&O Shearman MAURITIUS Law and Practice p.347 Contributed by BLC Robert & Associates MEXICO Law and Practice p.371 Contributed by Ritch, Mueller y Nicolau, S.C. Trends and Developments p.390 Contributed by Ritch, Mueller y Nicolau, S.C. Contributed by Osborne Clarke N.V. Trends and Developments p.420 Contributed by Osborne Clarke N.V. PARAGUAY Law and Practice p.428 Contributed by Fiorio, Cardozo & Alvarado PERU Law and Practice p.441 Contributed by Rubio Leguía Normand Trends and Developments p.456 Contributed by Rubio Leguía Normand POLAND Law and Practice p.461 Contributed by Sołtysiński Kawecki & Szlęzak Trends and Developments p.480 Contributed by Sołtysiński Kawecki & Szlęzak NETHERLANDS Law and Practice p.398

PORTUGAL Law and Practice p.488 Contributed by VdA

Trends and Developments p.509 Contributed by Abreu Advogados

SENEGAL Law and Practice p.517 Contributed by SCP Houda & Associés Trends and Developments p.531 Contributed by SCP Houda & Associés

SWEDEN Law and Practice p.538

Contributed by Harvest Advokatbyrå Trends and Developments p.559 Contributed by Harvest Advokatbyrå

SWITZERLAND Law and Practice p.566 Contributed by Loyens & Loeff

TAIWAN Law and Practice p.587 Contributed by Lee and Li, Attorneys-at-Law Trends and Developments p.605 Contributed by Lee and Li, Attorneys-at-Law UGANDA Trends and Developments p.613 Contributed by AF Mpanga USA Law and Practice p.619 Contributed by Moore & Van Allen, PLLC Trends and Developments p.640 Contributed by Freshfields

CHAMBERS.COM

INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.

Osborne Clarke N.V. is a future-focused inter - national legal practice with over 330 partners and more than 1,260 talented lawyers working across 26 global locations. Osborne Clarke is a full-service office with nine law practices in the Netherlands: financial regulatory, banking and finance, corporate M&A, employment, pen - sions and incentives, tax, litigation and arbitra - tion, real estate and infrastructure, tech, media and comms and notarial law. Osborne Clarke‘s

financial regulatory practice has a standout rep - utation with clients and Dutch regulators. The financial regulation team primarily represents innovative and tech-driven clients in the fields of banking, payments, investment services and cryptocurrency. It is also known as one of the most significant Dutch practices for licence ap - plications to key regulators – the DNB and the AFM. broad range of clients, including most of the larger Dutch banks and financial institutions, on many regulatory matters, including the latest Dutch banking license granted in 2024. He is qualified in the Netherlands and admitted to the Dutch Bar. Before joining Osborne Clarke in 2016, he worked as a financial regulatory lawyer at Allen & Overy Amsterdam and as a senior supervisor with the Dutch financial markets regulator, the AFM, where he headed many authorisations.

Contributing Editor

Johannes de Jong is a partner at Osborne Clarke in the financial regulatory team in Amsterdam. His expertise spans regulations concerning banks, the payments industry,

investment firms, and investment funds. He has particular knowledge in the clearing and settlement of securities and payments, custody, corporate governance, ESG, and AML/sanctions regulations. He has acted for a

Osborne Clarke N.V. Jachthavenweg 130 1081 KJ, Amsterdam The Netherlands Tel: +31 20 702 8600

Email: charlotte.schuurman@osborneclarke.com Web: www.osborneclarke.com/nl/locations/the- netherlands

CHAMBERS.COM

INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.

Introduction The year 2025 will be another exciting and dif - ficult time for the global banking industry. Even though the effects of the COVID-19 pandemic may have ended, the industry still has to deal with a mix of economic, regulatory, and techno - logical challenges. Political tensions and trade problems between major economies make things even more uncertain. Most banks must navigate the full implementation of Basel III standards by next year, which will increase capital require - ments and leverage ratio standards. Additionally, the rise of open banking and advancements in artificial intelligence and blockchain technology will further disrupt traditional banking models. Furthermore, the growing importance of environ - mental, social, and governance (ESG) factors will compel banks in most jurisdictions to integrate sustainability into their business strategies and risk management frameworks. Emerging Trends and Regulations Digital transformation remains a top priority for banks as they strive to improve operational efficiency, enhance customer experience, and mitigate cyber threats. Investments in mobile banking, artificial intelligence, and cloud-based technologies are becoming increasingly essen - tial for banks to remain competitive. Open banking, a trend that has gained significant momentum in recent years, will further disrupt the banking industry in 2025. By allowing third- party providers to access customer data, open banking has created new opportunities for inno - vation and competition which are now starting to materialise. Banks that can leverage open bank - ing to offer enhanced products and services will be well-positioned to meet evolving customer expectations. ESG factors are gaining prominence in the bank - ing industry on a global level. The Basel Com -

mittee on Banking Supervision, which devel - oped Basel III, has acknowledged the growing importance of ESG factors in the financial sector in the past years. This recognition has led to a focus on incorporating ESG risks into banks’ risk management frameworks and capital require - ments by banks, particularly in the EU, with the introduction of CRR3 and CRD6 starting in 2025 (also referred to as Basel IV ESG). Next to regula - tory pressures, investor demands and societal expectations are driving banks to integrate ESG considerations into their business strategies and risk management frameworks. Banks that can demonstrate a strong commitment to sustain - ability and ethical practices may benefit from enhanced reputation and increased investor confidence in certain parts of the world. Emerg - ing markets as well as – to a certain extent – the UK and the USA are less stringent in implement - ing requirements for ESG measures at banks and as such a lack of consensus remains on a global level. Cryptocurrency and blockchain technology con - tinue to evolve, presenting both opportunities and challenges for banks. While some banks are exploring ways to integrate these technolo - gies into their offerings, others remain cautious about the associated risks. The potential impact of cryptocurrencies and blockchain on the tra - ditional banking system remains a subject of ongoing debate in the banking industry. Of par - ticular interest in 2025 will be the rise of e-money tokens and asset-referenced tokens pegged to major currencies such as the US dollar or the EU euro. With 83.5 billion USDT stablecoins in circulation in 2024, stablecoins play a big role in the US market and a similar trend is visible in other parts of the world. Bolstered by new regulations in the EU, these types of stablecoins are also expected to play a significant role as an alternative means of payments by fintechs in the

CHAMBERS.COM

INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.

EU without the need for banks to ensure pay - ment finality. Consequently, banks that continue to rely heavily on traditional payment methods may find themselves at a competitive disadvan - tage in the long run. Interest Rate Prospects Central banks worldwide are carefully balancing the need to manage inflation with the goal of supporting economic growth. As of late 2024, the outlook for interest rates remains uncertain, despite a recent trend of rate cuts. While many central banks were raising interest rates to com - bat inflation in the preceding years, this trend reversed in 2024, with several central banks opt - ing to lower rates instead. However, the exact trajectory of rates in 2025 will depend on vari - ous economic factors, including inflation, eco - nomic growth, and geopolitical developments. This uncertainty about the future direction of monetary policy means that banks need to be prepared for both scenarios and manage their interest rate risk accordingly. This includes using hedging strategies and carefully managing asset and liability portfolios. Basel III Standards Fully Implemented Capital adequacy remains a critical concern for banks, as they must ensure they meet regulatory requirements and maintain financial stability. The full implementation of Basel III standards, includ - ing the Basel III.1 revisions, in most jurisdictions by early next year will strengthen capital require - ments, meaning that banks must continue to manage their capital levels prudently. Banks are working to comply with the increased capital requirements and leverage ratio standards. With the end of the leverage ratio relief for EU banks following the COVID-19 pandemic, deposit-heavy banks with small lending books may struggle in 2025 to meet the leverage ratio,

as relief is not expected in the EU any time soon. Although the Basel Committee’s recom - mendations are intended to serve as internation- ally agreed-upon minimum standards, individual regulators have the discretion to diverge from and exceed these standards within their respec - tive countries’ regulations. For instance, the Prudential Regulation Authority (PRA) in the UK announced that it is reviewing the leverage ratio requirements thresholds and is offering relief by consent (provided certain conditions are met) for certain banks. By contrast, the Federal Reserve Board in recent regulatory proposals suggests that the leverage ratio may be further tightened to strengthen the banking system in the USA, despite reiterated calls from the US banking sector to exclude excess reserves held in the Federal Reserve system from the leverage ratio. Overall, we do not expect a “race to the bottom”, where regulators weaken their rules to remain competitive. Asset quality is another key area of focus, par - ticularly in the context of uncertainty around interest rates rising or falling and potential eco - nomic downturns. Banks are closely monitoring loan portfolios and implementing strategies to mitigate credit risk under these circumstances. This includes measures such as stress testing, provisioning, and loan restructuring. Adequate liquidity is essential for banks to withstand mar - ket shocks and meet customer demands. Banks are focusing even more on strengthening their liquidity management practices and maintaining sufficient liquidity buffers. This involves careful monitoring of cash flows, managing funding sources, and implementing effective liquidity risk management frameworks. Banks across these jurisdictions thus need to carefully assess the impact of their ratios and adjust their business strategies as needed.

CHAMBERS.COM

INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.

Global Considerations and Geopolitical Tensions The ongoing geopolitical tensions, resulting from ongoing conflicts in Eastern Europe, the Middle East and trade disputes between major economies, have created a complex and uncer - tain environment for the banking industry. These conflicts have led to increased economic uncer - tainty, disrupted supply chains, and heightened geopolitical risks. Banks operating in or with exposure to these regions have faced signifi - cant challenges, including increased credit risk, operational disruptions, and reputational dam - age. Moreover, the broader geopolitical instabil - ity has contributed to market volatility, impacting investor sentiment and the overall health of the global financial system. Looking ahead to 2025, banks should anticipate that these geopolitical tensions may persist or even escalate. To navi - gate this uncertain environment, banks need to be proactively addressing these challenges to improve their resilience and position themselves in an increasingly uncertain geopolitical environ - ment. Technological Advancements and Changing Customer Expectations The rapid pace of technological advancements continues to transform the banking industry. Artificial intelligence (AI), machine learning, and big data analytics are being used to improve customer experiences, enhance risk manage - ment, and optimise operations. Banks that can effectively leverage these technologies will have a competitive advantage. In the UK and the EU, competition within the banking sector is also intensifying. The rise of fintech firms and the increasing popularity of digital banking ser - vices are challenging traditional banking models. Some banks might double down on existing cli - ent relationship models, while others must adapt to this changing competitive landscape by offer -

ing innovative products and services, improving customer experience, and leveraging technol - ogy to their advantage. Customer expectations are evolving rapidly, driven by digitalisation and increased competition from non-traditional financial services providers. Consultancy firms around the globe report extensively about what banks must do to address these challenges, but no hard and fast rule seems to apply for all banks next year. Conclusion In 2025, the global banking industry will face many challenges and opportunities. The full implementation of Basel III standards will require banks to carefully manage their capital and liquidity to meet new regulatory requirements. Changes in leverage ratio requirements will also necessitate strategic adjustments to maintain financial stability, particularly as some regions tighten these standards while others offer relief. Technological advancements like AI, blockchain, and open banking will push banks to innovate and improve their services, creating a dynamic and competitive environment. The rise of sta - blecoins, bolstered by new EU regulations, will further disrupt traditional payment methods, compelling banks to adapt or risk falling behind. With 83.5 billion USDT stablecoins in circulation in 2024, this trend is expected to grow, offering new opportunities for fintechs and posing chal - lenges for traditional banks. The growing importance of ESG factors will encourage banks to integrate sustainability into their operations, enhancing their reputation and attracting investors. Regulatory pressures, investor demands, and societal expectations will drive this integration, particularly in the EU with the introduction of CRR3 and CRD6. However, a lack of consensus on ESG measures remains globally, with emerging markets and regions like

CHAMBERS.COM

INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.

the UK and the USA being less stringent. Amidst uncertain interest rate prospects, with central banks balancing inflation management and eco - nomic growth, banks need to be prepared for both rising and falling rates. This includes using hedging strategies and carefully managing asset and liability portfolios. Geopolitical tensions and trade disputes between major economies add another layer of complexity, creating economic uncertainty

and market volatility. Banks operating in or with exposure to conflict regions will need to man - age increased credit risk, operational disrup - tions, and reputational damage. To navigate this uncertain environment, banks must proactively address these challenges to improve their resil - ience and position themselves advantageously. By staying agile and proactive, banks can suc - cessfully navigate these multifaceted challeng - es and seize new opportunities in the evolving financial landscape of 2025.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto Cases & Lacambra

France

Andorra

Andorra La Vella

Spain

Contents 1. Legal Framework p.12 1.1 Key Laws and Regulations p.12 2. Authorisation p.14 2.1 Licences and Application Process p.14 3. Changes in Control p.15 3.1 Requirements for Acquiring or Increasing Control Over a Bank p.15 4. Governance p.16 4.1 Corporate Governance Requirements p.16 4.2 Registration and Oversight of Senior Management p.17 4.3 Remuneration Requirements p.18 5. AML/KYC p.19 5.1 AML and CFT Requirements p.19 6. Depositor Protection p.19 6.1 Deposit Guarantee Scheme (DGS) p.19 7. Prudential Regime p.20 7.1 Capital, Liquidity and Related Risk Control Requirements p.20 8. Insolvency, Recovery and Resolution p.22 8.1 Legal and Regulatory Framework p.22 9. ESG p.23 9.1 ESG Requirements p.23 10. DORA p.24

10.1 DORA Requirements p.24 11. Horizon Scanning p.24 11.1 Regulatory Developments p.24

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

Cases & Lacambra is the leading business law firm in the Principality of Andorra. It has a marked international character and focuses on the client, aiming to offer the best comprehen - sive business law advice to local and interna - tional players. The firm has a solid, recognised and highly tested track record in both national and cross-border banking matters, and in the

regulation of financial markets, corporate and debt transactions, special situations and asset recovery. It has also had a respected tax prac - tice since 2016. The team is made up of highly qualified professionals, who have very marked methodologies and are oriented to satisfy the needs of the most demanding international in - stitutional and private clients.

Authors

Miguel Cases is the managing partner of Cases & Lacambra, and leader of the markets and financial services group. His practice includes the regulation of the financial sector, where he

Laura Nieto is a partner of Cases & Lacambra, and a member of the markets and financial services group. She specialises in banking and financial regulation, and has

is an expert in the legal framework and regulatory environment applicable to entities subject to prudential supervision, especially those rendering financial and investment services. He is also an expert in investment arbitration procedures. Miguel has extensive experience in advising credit institutions and investment services firms. He has also been a member of different working committees for the development of market standards in the International Swaps and Derivatives Association (ISDA).

extensive experience in advising credit institutions and investment services firms on the legal framework and regulatory environment applicable to entities subject to prudential supervision, especially in the provision of financial and investment services. Her practice includes the pre-contracting, contracting and post-contracting of financial instruments and structured products, as well as providing global legal advice on netting market agreements and financial collateral arrangements. Laura’s practice also includes cross-border transactions and funds distribution.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

Cases & Lacambra C/ Manuel Cerqueda i Escaler 3-5 AD 700 Escaldes-Engordany Principality of Andorra Tel: +376 728 001 Email: andorra@caseslacambra.com Web: www.caseslacambra.com

1. Legal Framework 1.1 Key Laws and Regulations

within the Andorran financial system, dated 3 June 2010; • Law 7/2013 on the legal regime of the enti - ties operating within the Andorran financial system and other provisions regulating the exercise of financial activities in the Principal - ity of Andorra, dated 9 May 2013; • Law 7/2024, of May 27, on the organisation and functioning of the operative entities of the financial system and market abuse; • Law 10/2008 regulating Andorran collec - tive investment undertakings, dated 12 June 2008; • Law 10/2013 of the Andorran Financial Authority (AFA), dated 23 May 2013; • Law 7/2021 of 29 April, regulating the Restructuring and Resolution of Banking Enti - ties and Investment Entities; • the Memorandum of Understanding signed between Andorra and Spain on 4 April 2011; • Law 20/2018 of 13 September, regulating the Andorran Guarantee Deposit Fund and Andorran Investment Guarantee System (the FAGADI Law); • Law regulating the disciplinary regime of the financial system, dated 27 November 1997 (Disciplinary Law);

The financial industry of the Principality of Andorra (“Andorra”) has historically been a key contributor to the domestic economy. In turn, the banking sector is the cornerstone of the Andorran financial system, which represents roughly 13% of the Andorran gross domestic product and almost 4% of Andorra’s wage earn - ers (according to the most recent data published by the Andorran Banking Association). Due to the country’s proximity to neighbouring European countries, along with the signature of the Monetary Agreement in 2011 between Andorra and the EU, the Andorran legal frame - work is aligned with EU legal initiatives in terms of banking regulation – namely solvency, capital requirements, supervision, investor protection and anti-money laundering and terrorist financ - ing. The most relevant Andorran regulations govern - ing the banking sector are as follows: • Law 35/2010 on the legal regime for author - ising the creation of new operating entities

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

• Law 35/2018 on solvency, liquidity and pru - dential supervision of banking entities and investment firms, dated 20 December 2018; • Decree approving the accounting framework for entities and collective investment under - takings created under Andorran law operating in the Andorran financial system, dated 22 December 2016; • Law 14/2017 on the prevention and fight against money or securities laundering and terrorism financing, dated 22 June 2017 (the AML Law); • Regulation for the development of Law 14/2017 on the prevention and fight against money or securities laundering and terror - ism financing, dated 6 June 2019 (the AML Regulation); • Law 20/2014, regulating electronic contract - ing and operators that develop their econom - ic activity in a digital space, dated 16 October 2014; • Law 13/2013, which regulates effective com - petition and consumer protection, dated 13 June 2013; • Decree regulating the cessation of payments and insolvency, dated 4 October 1969 (the Insolvency Law); • Law 9/2005, which regulates the Andorran Criminal Code, dated 21 February 2005; • Law 29/2021 on the protection of personal data, dated 28 October 2021; • Law 10/2012 on foreign investments, dated 21 June 2012 (the Law on Foreign Invest - ments); • Law 19/2016 on the international automatic exchange of information in tax matters, dated 30 November 2016 (the Tax Information Exchange Law); and • Law 8/2018 on payment and electronic money services, dated 17 May 2018.

The Andorran regulatory and supervisory author - ities for the banking sector are as follows. • The AFA is the regulatory and supervisory authority of the Andorran financial system, and its powers include issuing technical com - munications and recommendations in order to develop regulations and standards regarding the exercise of banking, financial and insur - ance activities. The AFA may also adopt the applicable fall-back of international standards for interpretational and prudential supervision purposes. On 17 September 2013, the AFA was accepted as a new ordinary member of the International Organization of Securities Commissions (IOSCO). • The Andorran Financial Intelligence Unit (UIFAND) is an independent body created to promote and co-ordinate measures to prevent money laundering and terrorist financing. It follows the recommendations of the European Council’s Committee of Experts on the Evalu - ation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) and the 40 recommendations from the Finan - cial Action Task Force (FATF). • The State Agency for the Resolution of Bank - ing Institutions (AREB) is a public institution and is responsible for managing the pro - cesses for the winding-up and resolution of banking and investment entities. In turn, the Andorran Fund for the Resolution of Bank - ing Institutions was created for the purpose of financing the measures adopted by the AREB. • The Andorran Data Protection Agency is a public and independent institution respon - sible for overseeing compliance with the treatment of personal information provided by individuals, private entities and Andorra’s public administration.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

• Although not a regulatory authority, the Asso - ciation of Andorran Banks (ABA) represents the collective interests of all Andorran bank - ing entities. The activity carried out by the ABA is relevant for the banking sector as it provides information for its members and the public in general, proposes appropriate rec - ommendations and promotes co-operation among its members. Lastly, it is also relevant to point out the self-reg - ulation activity carried out historically by bank - ing entities. Likewise, those Andorran banking entities that are, in turn, parent companies of consolidated groups also apply international standards on a self-regulation basis. 2. Authorisation 2.1 Licences and Application Process Prior authorisation from the AFA is required in order to provide banking activities in Andorra. Pursuant to Law 7/2013, Andorran banking enti - ties are authorised to render the following finan - cial services: • deposit-taking, which includes taking depos - its and other repayable funds (this service must only be rendered by Andorran banking entities); • granting loans and credits, including consum - er credit, mortgage, factoring, with or without recourse, and forfaiting; • financial leasing and non-financial renting with the option to buy or not; • the granting of guarantees; • payment transactions; • the issuance of means of payment, including credit cards, traveller’s cheques and bank cheques;

• transactions for own account or on behalf of clients (on money market instruments, exchange markets, foreign exchange and securities); • the issuance of securities and the provision of related services; • intermediation in interbank markets; • commercial reporting; Banking entities are also authorised to render the following investment and ancillary services: • the reception and transmission of orders in relation to one or more financial instruments; • the execution of clients’ orders; • trading for own account; • discretionary portfolio management; • providing investment advice; • the underwriting of either the issuance or placement of financial instruments; • the placement of financial instruments on the basis of a firm commitment or otherwise; • the management of multilateral trading facili - ties; • the custody and safekeeping of financial instruments on behalf of clients; • the granting of credit or loans to an investor to enable them to carry out a transaction in one or more financial instruments; • the hiring of security boxes; and • the issuance of electronic money. • advising companies on capital structure, strategy and related issues, and providing advice and services on mergers and acquisi - tions of companies; • foreign exchange services related to the pro - vision of investment services; • investment research; and • services related to underwriting the issuing or placing of financial instruments.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

The authorisation process for setting up a bank - ing entity in Andorra is governed by Law 35/2010. The submission form must be addressed to the AFA, along with the following documentation. • The specific features of the banking entity’s activity – ie, draft by-laws, the basic pro - gramme of activities, a specific statement on the foreseeable activities related to the promotion of the economy at a country level and a specific statement on the prospective provision of activities related to the spon - sorship and patronage of educational and cultural activities in Andorra. • The identification of the shareholders – if they are legal persons, information on the govern - ing bodies must be provided, along with the annual financial statements and audit reports for the last three years, an affidavit on the contributions made by the shareholders to comply with the requirements established by the legislation on anti-money laundering and terrorism financing, the curriculum vitae of shareholders and the members of the govern - ing bodies, and a code of conduct. • The banking entity’s structural, technical and economic forecast, including: (a) a description of the technical means, organisational and human resources; (b) a detailed description of the activities that are intended to be undertaken within An - dorra and those that are to be outsourced abroad; (c) a generic description of the measures that are planned to be implemented to ensure adequate internal control of the procedures; (d) the location of the premises and fore - casts regarding the establishment of subsidiaries, branches and offices; (e) the recruitment forecasts for staff during the first three years, indicating qualifica -

tion levels; and (f) balance sheets and profit and loss state - ments for the first three years. • Evidence of having paid a deposit of EUR3 million to the AFA – note that this amount shall be returned to the applicant within 20 working days of the rejection of the applica - tion, or within 20 working days from the start of the business activity if the application is authorised. Upon submitting this documentation, the AFA has a maximum of six months to notify its deci - sion. According to Technical Communication 1/2024 issued by the AFA, the submission fee for setting up a banking entity in Andorra is EUR35,868, and the annual supervision fee shall vary accord - ing to the banking entity’s balance sheet, with a maximum fee of EUR244,721. Branches are not allowed. For the provision of financial and investment services, a licence issued by the AFA is required (no EU passport). 3. Changes in Control 3.1 Requirements for Acquiring or Increasing Control Over a Bank Changes in the shareholding of a banking entity are subject to prior authorisation from and later registration with the AFA when such changes imply the following: • that any of the shareholders obtains or acquires a qualified participation; • regardless of the relevant participation, that any of the shareholders obtains representa - tion on the management body of the entity;

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

• that any of the shareholders increases the qualified participation to the extent that the percentage of voting rights or share capital is equal to or greater than 20%, 30% or 50%; or • by virtue of the acquisition, that the entity may be controlled or become a subsidiary. Qualified shareholding ( participació qualificada ) means any participation that, directly or indirect - ly, represents 10% or more of the share capital or voting rights of the banking entity. A share - holding is also deemed to be qualified if, with - out reaching the aforementioned percentage, it allows significant influence to be exercised over the entity. It is presumed that a natural or legal person can exercise a significant influence when, among other things, it has the power to appoint or remove a member of the board of directors. No specific restrictions on foreign ownership apply to banking entities. 4. Governance 4.1 Corporate Governance Requirements Pursuant to Law 7/2024, banking entities must have robust corporate governance arrange - ments, which include the following: • a clear organisational structure with well- defined, transparent and consistent lines of responsibility; • effective processes to identify, manage, moni - tor and report the risks to which they are or might be exposed; • adequate internal control mechanisms, including sound administration and account - ing procedures; and • remuneration policies and practices that are consistent with and promote sound and effective risk management.

Notwithstanding this, the aforementioned arrangements, processes and mechanisms shall be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the business model and the entity’s activities. Accordingly, the board of directors of Andorran banking entities is obliged to define the entity’s risk appetite and approve the relevant risk man - agement policies and periodically monitor its compliance, and to adopt adequate internal policies and procedures. As far as organisational requirements are con - cerned, Andorran banking entities must imple - ment a compliance function, a risk management function and an internal audit department. The compliance function is in charge of the supervision, monitoring and verification of effec - tive compliance with legal provisions and pro - fessional standards by employees and financial agents, in order to protect clients and minimise compliance risk. Moreover, in order to guarantee that the compliance function works appropriate - ly, the entities must ensure that they have ade- quate authority and both technical and human resources, and must appoint a person to be in charge of the compliance function, in addition to avoiding participating economically in the ser - vices or activities they are controlling. The risk management function carries out the following activities: • advising senior management on the manage - ment risk policies and the determination of the level of risk tolerance; • introducing, applying and maintaining man - agement risk procedures; and • monitoring the measures adopted to reduce or mitigate risk exposure.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

The internal audit function is entitled to prepare an annual report establishing its opinion regard - ing the efficiency and design of the internal con - trol and risk management systems of the entity. This report is addressed to the management body for its review. A copy of this report must also be addressed to the AFA within the first semester following the closing of the exercise. Law 7/2024 also establishes as a general prin - ciple that banking entities shall take all neces - sary measures in order to detect and prevent any conflict of interest that may arise during the per - formance of activities by any employee, director or assistant, which may cause any prejudice to clients. In addition, according to the proportionality prin - ciple, banking entities may have the following committees:

Technical Communication 163/05, issued by the AFA, highlights some rules on ethics and profes - sional behaviour that apply to Andorran bank - ing entities – namely, the prohibition on carrying out own-account operations under identical or better conditions than those of clients to the lat - ter’s detriment, and the prohibition on providing incentives and compensation to clients with rel - evant influence on the entity. The Andorran Banking Association published a Code of Conducts in 2017, which was updated in 2022 and reflects the minimum professional standards and recommendations for the bank - ing sector. In terms of diversity, Law 7/2024 states that the board of directors of banking entities must be formed by individuals with an appropriate mix of skills, diversity and experience. 4.2 Registration and Oversight of Senior Management Law 7/2013 sets a limit on the number of direc - torships that may be held by a member of the management body in a banking entity, taking into account individual circumstances and the nature, scale and complexity of the entity’s activities. In this vein, banking entities may not hold more than one of the following combinations of direc - torships at the same time: • one executive directorship with two non- executive directorships; and • four non-executive directorships. Moreover, board members must be persons of recognised commercial and professional honour, and must also possess adequate knowledge and experience in order to exercise their duties.

• audit committee; • risk committee; • appointments committee; and • remuneration committee.

The committees must be composed of members who do not perform executive functions, and the chairpersons must be independent directors. Law 7/2024 also provides for the possibility of combining the audit and risk committees and the appointments and remuneration commit - tees, according to the proportionality principle and upon the AFA’s authorisation. Banking entities must also develop adequate procedures for employees to notify possible infringements internally (ie, whistle-blowing channels). These procedures must guarantee the confidentiality of both the reporting person and the offender.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

The requirements of honour, adequate knowl - edge and experience must also be met by the managing directors, and by those responsible for internal control functions (ie, those in charge of the compliance function, the risk manage - ment function and the internal audit depart - ment, as stated in 4.1 Corporate Governance Requirements ). Prior authorisation by the AFA and subsequent registration is required for every appointment and replacement of directors and those respon - sible for the internal control functions. Likewise, banking entities must periodically assess (at least once a year) the continued suit - ability of their board of directors and of each of its members, and of the relevant committees. 4.3 Remuneration Requirements Remuneration requirements applicable to Andor - ran banking entities are aligned with European provisions and the guidelines on sound remu - neration policies issued by the European Bank - ing Authority and the European Securities and Markets Authority. Pursuant to Law 7/2024, banking entities at the group level, parent companies and subsidiar - ies – including subsidiaries established in third countries (with the exception of foreign subsidi - aries located in jurisdictions considered by the AFA to be equivalent for regulatory and super - visory purposes) – are obliged to comply with the remuneration requirements set forth in the applicable laws, regulations and technical com - munications issued by the AFA.

The principles that are applicable to remunera - tion policies are as follows: • the remuneration policy should be compatible with a prudent risk management and long- term business strategy; • the remuneration policy must be compatible with the business strategy and long-term interests of the banking entity, including measures to avoid conflicts of interest; • the board of directors must adopt and peri - odically monitor the general principles of the remuneration policy; • an internal and independent assessment of the implementation of the policy must be car - ried out at least once a year; • staff performing control functions must be independent and must have the necessary authority and be remunerated, regardless of the results of the business departments they monitor; • the remuneration of the general management or those responsible for the risk management and compliance functions should be super - vised directly by the remuneration committee or, if this committee is not created, by the board of directors; and • a clear distinction should be made between fixed and variable remuneration criteria. In this line, Law 7/2024 also establishes the fol - lowing ratios between the fixed and variable components of total remuneration: • the variable component shall not exceed 100% of the fixed component of the total remuneration for each individual; and • financial entities may allow shareholders to approve a higher maximum level of the ratio between the fixed and variable components of remuneration, provided that the overall level of the variable component does not

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

exceed 200% of the fixed component of the total remuneration for each individual. Andorran banking entities must follow the inspir - ing principles when implementing the remunera - tion policy, including salaries and discretionary retirement benefits for categories of staff such as senior management, employees who take risks, those who exercise internal control functions, and any employee who receives a lump-sum payment that includes them in the same scale of remuneration as senior management and other risk-taking employees. Law 7/2024 also establishes that infringements of these provisions may be sanctioned accord - ing to the Disciplinary Law. Andorra is totally committed to complying with international standards on anti-money launder- ing and terrorism financing through the imple - mentation of the Fourth Anti-Money Laundering Directive and the FATF’s recommendations. In this vein, both the European provisions and the FATF’s recommendations are intended to serve as the backbone of the Andorran system for the prevention of money laundering and terrorism financing. In turn, the UIFAND is entitled to draw up and publish annual reports and statistics to assess the effectiveness of the Andorran system for the prevention of money laundering and terrorism financing. Andorra is also periodically subject to the assessments of the Council of Europe, car - ried out by MONEYVAL. 5. AML/KYC 5.1 AML and CFT Requirements

Banking entities must comply with the following obligations: • prior to the commencement of the business relationship, the entity must solicit the infor - mation regarding both the client (and the beneficial owner) and the transaction in order to identify them; • the banking entity must report any suspicious transaction that could involve money launder - ing or terrorism financing to the UIFAND; • information about the identity of the issuer of the suspicious reporting must be kept confi - dential; • simplified and enhanced due diligence meas - ures must be applied according to the risk profile of the client, the business relationship, the product or the transaction; • a client admission policy must be drawn up; • documentation must be kept for at least ten years; • adequate procedures must be adopted for the detection of unusual or suspicious trans - actions, with the possibility of submitting a suspicious transaction report to the UIFAND; • AML/CFT training programmes for employees must be drawn up; and • an independent external audit must be con - ducted to verify compliance with AML/CFT provisions, with a copy of the report sent to the UIFAND. 6. Depositor Protection 6.1 Deposit Guarantee Scheme (DGS) The FAGADI Law regulates the guarantee system for deposits aligned with Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes. It also states that the FAGADI administers the scheme, as well as the relevant limits.

CHAMBERS.COM

ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra

7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements Law 35/2018 is aligned with: • Directive 2013/36/EU of the European Parlia - ment and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institu - tions and investment firms, amending Direc - tive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and • Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No 648/2012. It requires banking entities to have minimum internal capital that is adequate in quantity, qual - ity and distribution, having regard to the risks to which they are or may be exposed. Accordingly, Andorran banking entities must develop strate - gies and processes for assessing and maintain - ing the adequacy of their internal capital. The amount of capital maintained by banking entities is subdivided as follows: • Common Equity Tier 1 capital, intended to ensure business continuity; • Additional Tier 1 capital; and • Tier 2 capital, intended to cover losses in the event of a liquidation scenario. As far as the minimum capital requirements are concerned, the total amount of capital required to be held by banking entities must be at least 8% of their risk-weighted assets. The part cor - responding to the highest quality capital – Com - mon Equity Tier 1 capital – must represent 4.5%

The key regulatory features of the deposit guar - antee system are as follows: • if an Andorran banking entity becomes insol - vent, the clients’ deposits would be repaid up to EUR100,000, and additional coverages are foreseen in exceptional cases that guarantee the following, up to a limit of EUR300,000: (a) deposits from real estate transactions of a residential and private nature; (b) payments received by the depositor on a one-off basis and linked to marriage, divorce, retirement, dismissal, disability or death; and (c) payments that are based on the payment of insurance benefits or compensation for damages and are the result of a crime or a legal error, provided that these balances have been paid to the covered accounts during the three previous months; • the FAGADI’s ex ante resources must have reached 0.8% of guaranteed deposits by 30 June 2024, through the bank’s annual contri - butions; • the FAGADI will receive the available finance through contributions that its members sub - mit at least once a year; • if the FAGADI’s available financial resources are not sufficient to reimburse depositors in cases of coverage, the FAGADI board of directors may solicit extraordinary contribu - tions from member entities – these contribu - tions may not exceed 0.5% of their guaran - teed deposits per calendar year; and • the FAGADI board of directors, with prior consent from the AFA, may request higher contributions in exceptional circumstances that in no case imply exceeding the maximum limit of coverage established by the FAGADI Law.

CHAMBERS.COM

Page i Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108 Page 109 Page 110 Page 111 Page 112 Page 113 Page 114 Page 115 Page 116 Page 117 Page 118 Page 119 Page 120 Page 121 Page 122 Page 123 Page 124 Page 125 Page 126 Page 127 Page 128 Page 129 Page 130 Page 131 Page 132 Page 133 Page 134 Page 135 Page 136 Page 137 Page 138 Page 139 Page 140 Page 141 Page 142 Page 143 Page 144 Page 145 Page 146 Page 147 Page 148 Page 149 Page 150 Page 151 Page 152 Page 153 Page 154 Page 155 Page 156 Page 157 Page 158 Page 159 Page 160 Page 161 Page 162 Page 163 Page 164 Page 165 Page 166 Page 167 Page 168 Page 169 Page 170 Page 171 Page 172 Page 173 Page 174 Page 175 Page 176 Page 177 Page 178 Page 179 Page 180 Page 181 Page 182 Page 183 Page 184 Page 185 Page 186 Page 187 Page 188 Page 189 Page 190 Page 191 Page 192 Page 193 Page 194 Page 195 Page 196 Page 197 Page 198 Page 199