Guatemala - Banking and securities



The Bank of Guatemala (BANGUAT) is the central bank and the bank of issue. The Monetary Board, an independent body, determines the monetary policy of the country. Associated with the Bank of Guatemala are six other government institutions: The National Mortgage Credit Institute (the official government mortgage bank); two development banks, the National Bank of Agricultural Development and the National Housing Bank; and the National Finance Corp., organized in 1973 to lend funds to industry, tourism, and mining to provide technical assistance. BANGUAT intervenes in the foreign exchange market to prevent sharp deviation in the exchange rate. In 1998, the Central Bank spent over $500 million to support the exchange rate, but the currency depreciated by 15% anyway that year.

As of 2002, the formal banking system consisted of 32 private commercial banks, three state banks, and several financial houses. Over 18 international banks are represented in one form or another. The five largest banks control approximately 45% of total assets. Several financial institutions collapsed in 1998 and 1999, prompting the government to bring banks into line with the Basel convention on minimum capital requirements. The government also hopes to make credit more available. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $2.7 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $6.3 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 10.6%.

When the Bank of Guatemala was established the Fund for the Regulation of the Bond Market was created to promote security issues. Nevertheless, Guatemalans still tend to prefer tangible investments, and there is no fully developed securities market. The National Stock Exchange of Guatemala (the Bolsa Nacional de Valores-BNV) opened in 1989 where shares from private companies in the country and other securities are traded. It is the largest of Guatemala's stock exchanges. The other two main exchanges, the Bolsa Nacional Global and the Bolsa Agrícola, merged to form the Corporación Bursatil in 1994. Three government bonds are traded on the exchanges, including CENIVACUS, CERTIBONO, and CDP. The volume traded in 1999 was $5.9 billion.

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