Law Regulating The Powers Of The Various Operational Components Of The Financial System, 19-12-96

Original Language Title: Llei de regulació de les facultats operatives dels diversos components del sistema financer, de 19-12-96

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Law regulating the powers of the various operational components of the financial system since the General Council at its session of 19 December 1996 has approved the following: law regulating the powers of the various operational components of the financial system preamble this law is enacted in accordance with the fourth transitional provision of law regulating deposit guarantee reserves and other operational obligations to maintain and deposit for entities operating in the financial system, dated 11 May 1995, which States that, prior to the development of the regulation of minimum capital referred to in article 16 of the law of regulation of the financial system (LOSF) dated 27 November 1993-development planned for no later than 31 December 1997 and that has to give way to the possibility of submitting applications for the Constitution and the establishment of new entities to integrate in the Andorran financial system-, the General Council will have to approve, in accordance with a schedule set in the same transitional provision, other specific regulations should complement the basic legislative scheme referred to the financial sphere.

The information you provided the procedure of adjustment of the entities authorised at the date of publication of the LOSF, the experience gained from that date and the reflections that were doing in the perspective of an opening in the financial system, allow you to register now, with a knowledge of the larger cause, the regulation of the operational of the different components of the financial system with projective and purposefulness.

Below are the basic content of this law and the reasons are based.

As well as in the financial system operating components LOSF were placed into three groups-banks, financial institutions, credit activity and other financial institutions – in order to group together separately the entities that have a component of funds well differentiated from the others, from now on, there will be four groups that make up the operational structure of the financial system: banks, non-banking financial institutions-specialised credit investment and financial institutions, financial entities of various services.

As for the banks, the leaves already configured enough LOSF your operating field. However, this law brings various clarifications, specifies the activities that, in the case of carry them out, you have to exercise through a legally independent company, and their ability to provide commercial performance outside the financial sector. In another order of ideas, is set a deadline for the regularization of particular situations; and regulates the normalization of the Caixa d'Estalvis i Pensions in Andorra, in the merits of the historical, institutional and technical characteristics are met in this case.

The result of the procedure of adjustment established by the LOSF showed that the Group of financial institutions with credit activity-to a greater precision terminology, they called themselves non-banking financial institutions-specialised credit-has a minimum effective configuration; In addition, it has been considered that in principle the economic characteristics of the country are not conducive to a significant development of this group.

For this reason, it has been thought appropriate to foresee a simplification of its structure and to introduce some accuracy in relation to the mechanisms of funding.

The group, which until now was known as other financial institutions is the subject of a larger development. Indeed, the LOSF was limited to make a statement of the entities that consisted of the group, and will not be entered in the definition of their respective activities. With the information now available, the regulation of these entities can be done on a more objective knowledge and with a greater conceptual precision.

This group has been divided into two: investment banks and financial institutions of various services. The Division has been made to separate entities that have powers and responsibility for management of others, of those that involve a financial service but that does not involve functions of management.

On the other hand, this Division was particularly timely because of the incorporation into the system of financial entities which, by virtue of being limited to advice, had been on the sidelines; It is a decision that has been taken because the international experience indicates that it is convenient to have under control the financial authority of the activities of this nature.

In the formulation of the regulation of these financial institutions must match, as usual, of the specific reality and the convenience of Andorra, and have taken into account the activities, structures and the denominations that prevail in the countries that we can serve as a reference. It has been tried that the terminology you need not enter any possibility of misunderstanding of interpretation. For this same reason, the law incorporates some definitions that has been tried to be clear and accurate.

It is also appropriate to point out that it maintains the principle that, while not new circumstances occur that can do modify this criterion, only the banks have the right to receive on a regular basis of the public deposits and other funds refundable. The legislators want the functional structure of the financial system to prioritize the safety of depositors and to facilitate the procedures for combating the laundering of money from organized crime.

Without that comes into contradiction with what is set forth in the previous paragraph, but that formula the fact that illustrates the unusual nature of the receipt of the funds refundable to the public, the law precisely the conditions that the financial institutions, as well as any other commercial company, must meet to be able to incorporate in their financial structure funds refundable in return of an emission of certain values.

The maintenance of the exclusive nature of the right to receive deposits from the public and other non-refundable funds will have to imply that, in the regulatory developments that are happening, the banks will continue to be the subject of a special level of technical and economic requirements.

The present Law involves the modification of the second and third chapters of LOSF, as well as some other less relevant changes. The legislators feel that once you've completed the legislative program set for the years 1996 and 1997, will be in a situation of


to consolidate, in a general law, the legal body that will govern the financial system from the beginning of 1998.

Chapter 1. Composition of financial system Article 1 The Andorran financial system set consists: of banks, non-banking financial institutions-specialised credit, investment banks and financial institutions of various services of professional associations of financial sector of organs of authority Executive technique Chapter 2. Operating components of the financial system Article 2 banks in) Bank is understood to be a company that is dedicated to receiving deposits from the public and other reimbursable, and grant credits, of any nature, on their own.

b) banks can develop, in addition, the following activities: granting of guarantees and similar payment operations and management of means of payment (credit cards, traveller's cheques, letters of credit) operations-on their own or to its customers-from currency exchange, monetary and financial instruments, securities, futures and options on participation in the issuance of securities and providing related services administration and custody of securities asset management financial advice business reports of rental safes c) banking institutions that also want to perform investment management activities and/or activities of life insurance companies can do it only by participating with the majority or a minority character in institutions of investment and/or life insurance companies, which may be set up for this purpose, which must be legally distinct and due to its location.

However, the life insurance contracts can be performed using the structures of the Bank.

of) the banks will not be able to dedicate, neither directly or indirectly, any economic activity that is not limited to the financial sector.

e) The direct or indirect shareholdings of banks in non-financial entities may not be higher than 25% of the capital of the investee entity.

Excluded from this limit the investments in non-financial instrumental societies, the object of which is exclusively to provide a service to the institution or to manage assets of the entity.

In cases where, as a derivation of a credit operation or other circumstances unrelated to the will of a bank will have to take care of a stake larger than that stipulated in the first paragraph in a financial company, you have to communicate to the Andorran National Institute of finance, and should regularize the situation within a period of two years. For a possible postponement of the period required for obtaining the authorization of the Ministry of finance with the previous report of the INAF.

f) the value of the direct or indirect shareholdings set accounting of banking entities in non-financial entities may not exceed 40% of the own funds of the Bank. This percentage will be counted within the limits set by article 13 of the law on regulation of solvency and liquidity criteria in financial institutions.

g) the General Council establishes the criteria and indicates the circumstances will be taken into account in order to attribute the character of general interest to certain investments.

Once defined by law the provisions of the preceding paragraph, the Ministry of finance, with the previous report of the INAF, agreed exceptions to e) and f) of the same article, for a definite or indefinite period.

h) for the purposes of the present law, the investments in public companies, as they are defined in the General Law on public finance, are excluded from the application of sections e) and f) of article 2.

Article 3-non-banking financial institutions, specialised credit to) have the status of non-banking financial institutions-specialised credit, financial institutions engaged, usually and for themselves, in one or more of the four types of specialised credit financing mortgage credit term sales as follows: financial leasing ("leasing") purchase and management of payment of invoices ("factoring") b) financial institutions-non-banking specialist credit will not be able to dedicate , neither directly or indirectly, to any other economic activity that is not one of the types of specialised credit from point a) precedent.

c) The direct or indirect shareholdings by financial institutions-non-banking entities, non-specialised credit commercial in the regulated by this article, may not be higher than 25% of the capital of the investee entity.

In cases where, as a derivation of a credit operation or other operations unrelated to the will of a financial institution – no specialised credit Bank, this will have to take care of a participation in an entity, greater than that stipulated in the preceding paragraph, it should communicate to the Andorran National Institute of finance, and should regularize the situation within a period of two years.

For a possible postponement of this regularization period, it will require the authorization of the Ministry of finance with the previous report of the INAF.

Article 4 financial institutions investment) have the status of investment financial institutions: financial institutions asset management financial institutions investment management financial institutions for the promotion and capital b) wealth management financial institutions are dedicated to the management of individual assets.

The financial institutions investment management are dedicated to the management of these bodies, and hold the Administration and representation.

Financial institutions and promotion of risk capital are financial institutions that are dedicated to the promotion and to the participation in the capital of non-financial entities that are not traded on the stock exchange.

c) wealth management financial institutions, financial institutions, investment management and financial institutions for the promotion and capital cannot be spent, neither directly or indirectly, to any other economic activity other than that specifically is own by virtue of the present article.

d) direct or indirect shareholdings in financial institutions and asset management of financial institutions investment management in commercial entities may not be higher than 25% of the capital of the investee entity.

Article 5


Financial institutions of various services to) have the status of various services financial institutions financial institutions dedicated to one of the following activities: currency exchange financial advice financial mediation b) financial institutions of services cannot be spent, neither directly or indirectly, to any other economic activity other than that specifically is own by virtue of the present article.

c) The direct or indirect shareholdings in financial institutions of various services in commercial entities may not be higher than 25% of the capital of the investee entity.

Article 6 Financial Institutions that are not part of the financial system do not have the condition of financial institutions, for the purposes of the present law, and therefore do not form part of the financial system, entities that, despite having a social object of financial character, are instrumental societies the statutes of which limit its activities to the economic sphere of its shareholders (and do not allow the public sale of shares).

Article 7 insurance companies and financial institutions reasseguradores The insurance companies are governed by the "law governing the performance of the insurance companies in the Principality", in the hopes of a future integration in the financial system. With regard to the activities of reinsurance, you need to wait for the corresponding legislative development.

The participation of banks in insurance companies exclusively of life are considered, for the purposes of article 2 of this law, shares in financial institutions.

Chapter 3. Additional terms and conditions relating to the operating components of the financial system Article 8 introduction of new financial activities) the Government, before the introduction or the realization of new financial activities, which are not technically comparable to the provisions of this law, will be submitted to the General Council, with the technical report of the INAF, a proposal of integration of these new activities in the Andorran financial system.

b) empowers the Government because, with the previous report of the Institut Nacional Andorrà de Finances, can have that is on hold, prohibit by injunction, the eventual introduction or the development of activities that are subject to the point a) precedent, as it is relayed to the General Council the documentation and information needed for this regulates the new activities in question.

Article 9 Interdiction of non-banking entities to receive regularly the public deposits and other funds refundable to non-banking financial institutions) and non-financial entities are not empowered to receive regularly the public deposits and other funds refundable.

b) without prejudice to that stipulated in the preceding point, the non-banking financial institutions and non-financial entities can only issue debentures or other securities of bank credit reconeixin or create debt, within a period of no less than three years.

In no time, the volume of emissions in circulation of a financial institution Bank and not a financial entity can not exceed the 75% of its own funds.

Article 10 status authorization to exercise activities in the financial sector is granted only to legal persons of Andorran law.

Chapter 4. Article 11 investment definition and characteristics of the investment in) to the effect of the present law, the investment are collective bodies, which have the objective of the acquisition, possession, administration and disposal of assets, by means of the public offer of its shares or shares, in accordance with the principle of risk diversification.

b) the Administration and representation of investment must fall on a managing investment bodies.

c) depositary function, consisting of the custody of investment, should fall on a bank.

d) a single entity will not be held simultaneously the functions of managing and depositary entity.

Article 12 characteristics of investment mutual funds investment mutual funds are investment, the object of which is the acquisition, holding, management and disposal of securities and other negotiable financial assets in organized markets and regulated in accordance with the principle of risk diversification, by using the resources from the subscription of the shares.

The corresponding assets interbank deposits and the like do not need to meet the condition of tradable in markets organised and regulated.

Article 13 characteristics of pension funds pension funds are investment, the object of which is the acquisition, holding, management and disposal of assets in accordance with the principle of risk diversification, by using the resources from the subscription of the shares.

First additional provision In all regulatory texts which mention the "financial institutions with credit activity", it is understood as equivalent to "non-banking financial institutions-specialised credit". On all regulatory texts which mention the "other financial institutions" is understood to refer to the "investment" or "financial institutions financial institutions of services", as appropriate, in accordance with the application of articles 4 and 5 of this law. And in all regulatory texts where it mentions the, until now, three groups of financial institutions, it is understood that it refers to the four groups defined in article 2 of this law.

Second additional provision the appropriateness of the permissions granted to "Portfolio Companies" becomes suitability for authorization as a financial institution of investment management.

The INAF makes the corresponding to the affected entities within a maximum period of thirty days from the publication in the OFFICIAL GAZETTE of the present law.

First transitional provision to) The individuals and companies who, by virtue of article 5 of this law, pass now form part of the financial system have to urge a file of adaptation of their authorization.

1. With regard to legal persons, the application must be accompanied by the following documents: certification of registration of authorisation of the shareholders certificate according to the shareholders with more than 10% of the share capital does not have a criminal record for wilful balance and audited income statement of last two exercises activities report of the last two exercises composition of the current Board of directors or of the superior administrative body


2. With regard to natural persons, the application must be accompanied by the following documents: certification of residence a certificate stating that they have no criminal record for wilful display of corresponding title, which proves a good reputation and a proper professional qualification of the financial activities of the last two exercises other professional activities developed by the applicants b) applications have to be submitted to the Ministry of finance no later than three months from the entry into force of the present law.

c) the non-submission of the request for adjustment amounts to a waiver of the authorization.

d) the adequacy of the existing authorization is declared by the Ministry of finance, on the basis of the technical report of the INAF.

e) can be given the temporary adaptation to existing authorization to individuals for the professional exercise of the services financial advice financial mediation and integrated in the group corresponding to the financial institutions of various services. In these cases, those affected have to adapt, before 31 December 1997, its position on the provisions of article 10.

f) Declaration of suitability of the authorization, as long as appropriate, must be presented within a period not exceeding six months from the date of receipt of the request, or the submission of complementary information explaining that you can ask the INAF.

g) once the Declaration of compliance, organizations that is included in the financial system by virtue of this law have to adapt its structure, prior to 31 December 1997, which determine the law of regulation of the financial system, dated November 27, 1993, and any other applicable legal provision.

Second transitional provision to) the banks and financial institutions are currently investment managers or dipositàries of any organisation of investment should communicate to the Ministry of finance, no later than 30 June 1997, indicating the name of the organisation and of the depository institution, and its characteristics, must attach the following documents: statutes, regulations, information and advertising documents audited annual financial statements, 1995 and 1996.

b) banks are forced to adapt, no later than 31 December 1997, the structure of investment management at the provisions of the present law, especially as it relates to the creation or adaptation of the corresponding financial investment entity.

The Government is expressly empowered to solve the requests for authorisations or upgrading financial institutions to manage investment referred to in the preceding paragraph.

Third transitional provision to) the entities which take place in the financial system, which have shares that do not conform to the provisions of the present law, they must report to the Ministry of finance, no later than 31 December 1997, indicating their characteristics.

b) all entities included in the Andorran financial system will need to adapt the structure of its shares in established by articles 2, 3, 4 and 5 before 31 December 1998.

c) entities in the financial system that want to keep beyond 31 December 1998 a structure of its shares that do not fit with the provisions of articles 2, 3, 4 and 5 will have to address a reasoned request to the Ministry of Finance before 30 June 1998, which, with the technical report of the INAF , solved within a maximum period of two months.

Fourth transitional provision unique situations relating to the fifth transitional provision of the LOSF should be definitely resolved before 31 December 1997, unless they modify legally this term.

Fifth transitional provision in) without prejudice and with respect to the provisions of the fourth transitional provision precedent, authorises the Caixa d'Estalvis i Pensions so that you can set up a limited company of Andorran law that have as object the continuity of banking activity carried out in Andorra.

b) This new entity is not subject, until 31 December 2011, to the limitations provided for in article 3 of the regulation of commercial companies dated May 19, 1983, in regard to foreign participation in the capital stock.

c) the Government, with the previous technical reports of the INAF, establishes the procedures necessary for the proper development of the provisions of the present provision.

of) the Government, prior to the incorporation of the company indicated at point a) precedent, will become with the Caixa d'Estalvis i Pensions those agreements that ensure, especially as it is effectively the exception formulated in the previous point b), which Andorra will benefit, in terms of social equity, the work carried out by the above-mentioned institution.

Sixth transitional provision the General Council shall decide, not later than 31 December 1997, the investments of the investment mutual funds, pension funds and promotion companies and venture capital, and the rights and obligations of the managers, the depositaries and investors concerned by these investment instruments.

Repealing provision are repealed articles 2, 3, 4 and 5 of the law of regulation of the financial system, dated November 27, 1993, and any other provision of equal or lower rank which contradict the provisions of the present law.

First final provision no person, natural or legal, can become professionally related activities in articles 2, 3, 4 and 5 If you don't have the corresponding authorization to exercise them, under penalty of sanctions that correspond according to the legislation and those that are established in the planned regulation of discipline of financial institutions.

Second final provision expressly empowers the Government to reglamenti any other matter related to this Act.

Casa de la Vall, 19 December 1996 Josep Dallerès Codina, General Syndic Us the co-princes the sancionem and promulguem and let's get the publication in the official bulletin of the Principality of Andorra.

Jacques Chirac Joan Martí Alanis, President of the French Republic the Bishop of Urgell Co-prince of Andorra Co-prince of Andorra

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