Rules and guidance
This section contains information regarding the text of the legal provisions, regulations and technical communiqués, as well as the general guidelines adopted in the Principality of Andorra within the field of prudential standards applicable to banking entities and investment firms.
Transposition and implementation of Directive 2013/36/EU and Regulation 575/2013 have been mainly carried out with the incorporation into the Andorran legal framework of:
1. Law 35/2018, of 20 December, on solvency, liquidity and the prudential supervision of banking entities and investment firms (Law 35/2018), which was published in the Official Gazette of the Principality of Andorra (BOPA) on 23 January 2019 and which represents a significant leap with respect to the Law regulating the criteria of solvency and liquidity for financial bodies of 29 February 1996.
Nevertheless, it has also meant the modification -through final provisions of Law 35/2018- of the current legal framework as detailed below:
- It has been necessary to amend Law 7/2013, of 9 May, on the legal regime of the operative entities of the Andorran financial system and other provisions regulating the exercise of financial activities in the Principality of Andorra in order to adapt the legal regime applicable to the operative entities of the Andorran financial system in accordance with the principles of Directive 2013/36.
- In order to incorporate the requirements of this Directive in very relevant aspects for the purposes of the organisation and activity of the entities operating in the financial system in areas such as corporate governance, with specific obligations for senior management, the creation of delegated committees of the board of directors with the presence and commitment of independent directors, the assessment of the board of directors’ suitability requirements, a specific regime of incompatibilities for them and the development of remuneration policies that are better aligned to entities’ risks, among others, it has become necessary to amend Law 8/2013 of 9 May 2013, on the organisational requirements and terms of operation of operative entities of the financial system, protection of investors, market abuse and financial guarantee agreements. In this sense, an important advance has been made in the field of corporate governance by promoting the most efficient and suitable management practices for carrying out financial activities and the current system of qualified participations has been modified by making technical amendments to the authorisation process and their evaluation criteria.
- With regard to access to the activity and the authorisation process, Directive 2013/36 has been adopted by amending Law 35/2010, of 3 June, on the authorisation regime for the creation of new operating entities in the Andorran financial system.
- Law on the disciplinary regime of the financial system, of 27 November 1997 has experienced a substantial change in order to adapt the sanctioning regime for entities operating in the financial system to the new obligations arising from the incorporation of the regulations mentioned in the preceding paragraphs. Thus, the appropriate infringements are introduced to make these new legal obligations effective, and the sanctioning regime is updated accordingly, guaranteeing that the sanctions, both pecuniary and non-pecuniary, are adequate and dissuasive for the entities. and for the senior management.
- Finally, one of the effects derived from Law 35/2018 is to strengthen the functions entrusted to the AFA as a prudential financial supervisor in the Principality of Andorra. In order to adapt to these new functions, Law 10/2013, of 23 May, of the Andorran Financial Authority has been amended to strengthen the functions and competencies in matters of prudential supervision and cooperation with other national and third country competent authorities.
2. Regulation implementing Law 35/2018, of 20 December, on solvency, liquidity and the prudential supervision of banking entities and investment firms, which was approved by the Government on 6 March 2019.
3. Regulations concerning the adoption of European Union technical standards applicable in matters of solvency, liquidity and prudential supervision of banking entities and investment firms; two regulations have been approved, on 3 April 2019 and 3 November 2021, by which various technical regulations issued by the European Commission are incorporated into the Andorran legal framework. Specifically, the following European regulatory technical standards:
Regulatory Technical Standards
4. Technical Communiqué no. 255/21-EB bis Periodic information requirements which, with the aim of reducing the reporting burden for banking entities of the Principality, amends Technical Communiqué nº255/19 which established the reporting of periodic information to be sent to the AFA from 31 March 2019. The latter repeals the Technical Communiqué nº 254/18 which established the reporting of periodic information to be sent to the AFA from 30 September 2018 and incorporates into the Andorran legal framework part of the Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council
Section 1 of article 73 of CRD IV, transposed into Andorran legislation in article 15 of Law 35/2018, states that “entities and their consolidable groups must have sound, effective and comprehensive strategies and procedures, to constantly assess and maintain the inflows, types and distribution of internal capital that they consider appropriate for covering the nature and the level of risks to which they are or may be exposed.”.
Likewise, section 1 of article 86 of CRD IV, transposed into Andorran legislation in article 25 of Law 35/2018, states that “entities must have sound strategies, policies, procedures and systems to identify, measure, manage and supervise liquidity risk over an appropriate set of time horizons, including intraday, to ensure that entities maintain an adequate level of liquidity buffers.”.
In this sense, the AFA has published the aforementioned Guide with the purpose of facilitating to banking entities the application of the capital and liquidity self-assessment processes established by the aforementioned articles 15 and 25 of Law 35/2018.