Banking in Paraguay - Money Safe Box

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Banking in Paraguay

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Paraguay's banking and financial services industry is still recovering from the liquidity crisis of 1995, when news of widespread corruption resulted in the closure of several significant banks. Reform efforts spurred by the International Monetary Fund (IMF) and World Bank helped restore some credibility to Paraguay’s banking industry. Still, a paucity of credit options hinders the overall economy. Paraguay has a long history as a money-laundering center. The government has taken steps to curb the problem, but enforcement of anti-laundering legislation remains inconsistent.

Foreign companies either partially or wholly own most banks and financial institutions in Paraguay. Paraguayan banks hold less than 10 percent of deposits. Of the 16 banks operating in Paraguay in 2003, 50 percent were wholly foreign-owned and 25 percent were partially owned by foreign companies. Paraguay’s Central Bank exists to stabilize the financial sector, making sure that another run on banks, such as the one that occurred in 1995, does not recur. The Superintendencia de Bancos regulates the banking system, monitoring the percentage of non-performing loans in the banking system. Bank deposits rose significantly in 2004, along with the percentage of local currency in total deposits. Local currency deposits increased by 26 percent in 2004, a sign that Paraguayans are gaining confidence in the stability of Paraguayan currency. In another promising development, interest rates dropped dramatically in 2004, from 50 percent in 2003 to 27 percent in 2004.

Paraguay's stock market, the Bolsa de Valores y Productos de Asunción, began trading in October 1993. The tradition of family-owned companies and economic instability kept investment low throughout the 1990s. The value of shares on the Asunción stock exchange rose by 390 percent in 2004, reaching US$17.5 million

The Central Bank of Paraguay (BCP Banco Central del Paraguay) was founded in 1952 as a state-owned, autonomous agency charged with establishing the government's monetary credit and exchange policies. Recommendations in early 1961 by an economic mission of the IDB and IBRD led to the establishment of the National Development Bank to provide an effective source of medium- and long-term agricultural and industrial credits. Savings and loan institutions are regulated by the superintendent of banks. There are two state-owned banks, some locally owned banks, and nine foreign banks. Foreign-owned banks account for 86% of total deposits and 83% of all loans, and the two largest banks—Banco de Asunción and Citibank—are foreign-owned.

In 1995, there were 35 banks operating in Paraguay, of which nine had opened since 1990. During the same period the number of finance companies nearly doubled to 68. The increase in the number of banks and finance companies, out of all proportion to the size of the economy, was generally believed to be related to the rapid increase in "hot money" flows through Paraguay associated with drug smuggling. In late 1995, the Central Bank announced a freeze on the opening of new banks and finance companies on the grounds that the local market was saturated. In the same year, a currency crisis caused the collapse of ten institutions, requiring $400 million in government subsidies. The 1996 Banking Law strengthened supervision of the banking system; in 1997 Banco Union was liquidated, as were two of the largest public banks due to poor performance. There are now 40 finance companies. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $668.1 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $2.6 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 13.45%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 20%.

Paraguay's first stock market began trading in October 1993. There are 60 local companies traded on the exchange. All companies have a minimum paid-up capital of $50,000. However, the tradition of family ownership and almost universal practice of "double accounting" for tax evasion purposes places limits on the growth of a capital market. In 1998, the stock market handled approximately $10 to $15 million per a month in transactions.

Major banks
Banco Continental
Banco Itaú Paraguay
Banco Regional
BBVA Paraguay (Grupo BBVA)
Visión Banco
Sudameris Bank (Abbeyfield Group)
Banco Nacional de Fomento
HSBC Bank Paraguay SA (HSBC Group)
Banco Atlas
Banco Familiar

Electronic banking is available in Paraguay and offered by the country’s leading banks.

Same-day credit transfers between banks in Paraguay are made via SWIFT.

There is currently no interbank system in Paraguay for low-value electronic credit transfers. Electronic credit transfers are only available if the originator and beneficiary have accounts with the same bank. Direct
credits between accounts within the same bank are commonly used for payroll and supplier payments.
Paraguay is in the process of developing an ACH system for low-value interbank electronic credit transfers.

Direct debits (débitos automaticos) are available in Paraguay and used for low-value recurring payments such as utility bills
Direct debits may be used for one-time or recurring payments, provided there is a signed authorisation in place.
There is currently no interbank system in Paraguay for direct debits.
Direct debit is only possible if the originator and receiver have accounts with the same bank.

The cheque is the most popular payment instrument in Paraguay in terms of volume and is used for both retail and commercial transactions.
Cheques can be denominated in PYG and USD.
There are two types of cheque in Paraguay: regular cheques (cheques comunes) and post-dated cheques (cheques diferidos).
Regular cheques have to be paid on demand and are not acceptable for deferred payment.
Post-dated cheques are payment orders payable on a future date and are often used in retail/consumer payments and commercial transactions.
Cheques and return items are physically exchanged by the banks each business day in Asunción and at five regional clearing houses. Cheque clearing times depend on the city in which the deposited cheque is drawn and deposited.

Visa and MasterCard are the principal credit card issuers in Paraguay, although the regional credit card Cabal, which primarily serves cooperative banks, and the national credit cards Credicard, Dinelco Crédito and Bancard Check, are also available.
There are approximately 520 ATMs and 11,000 POS terminals in Paraguay.
There are three main ATM networks in Paraguay:
Red Infonet, operated by Bancard, currently includes all 15 of the private banks, five finance companies and nine cooperatives.
Dinelco, operated by BEPSA (processor and administrator of credit and debit cards), includes state-owned Banco Nacional de Formento.
The Procard ATM network (owned by Procard SA which in addition processes Visa, MasterCard and Credicard credit card payments) includes Banco Nacional de Formento, Banco Atlas, Visión Banco and several finance companies and cooperatives.
ATMs in Paraguay can be used to facilitate the payment of utility bills, credit card bills and taxes. More recently the functionality of ATMs was extended to enable consumers to purchase pre-paid mobile phone minutes.

Paraguay has 15 private banks and one state-owned bank (Banco Nacional de Fomento). There are also 11 finance companies, one savings and loan institution and two representative offices of foreign banks (Delta Bank and Trust Company and Lloyds TSB Bank).

Seven of Paraguay’s 15 private banks are foreign-owned or foreign‑controlled — Citibank, Banco do Barsil, Banco de la Nacion Argentina, Banco Itaú Paraguay, BBVA Paraguay and HSBC Paraguay. Banco Sudameris is 98% foreign-owned.

Banco Central del Paraguay
Leading banks: Banco Continental
Banco Itaú Paraguay
Banco Regional
BBVA Paraguay
Superintendency of Banks
Ministry of Industry and Commerce
Ministry of Finance
National Chamber of Commerce and Services of Paraguay
Bolsa de Valores y Productos de Asunción
BEPSA del Paraguay

Interest can be earned on resident and non-resident current accounts.
Time deposits (depósitos a plazo fijo) are available in PYG and USD in arange of maturities.
Certificates of deposit (certificados de depósito de ahorros – CDAs) are available in PYG and USD.

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