There is still uncertainty among U.S. citizens and companies abroad, regarding the effects of this law’s extraterritorial reach.
The start of registration stipulated by FATCA law (Foreign Account Tax Compliance Act) of the United States is January 1st, 2013, with enforcement beginning on 1st July of that year. However, many questions remain in several sectors such as insurance, securities and pensions, and even the regulators don’t have a clear idea of the effects of the law.
To date, about 8 banks in Guatemala, 4 in El Salvador and 3 in Honduras, Nicaragua and Costa Rica offer the service; there is still much ground to cover in the region.
The director of Technology at the company Ebclosión, Derick Brol, indicates that in Central America in 2011 there were mobile phone banking services in about 8 banks in Guatemala, 4 in El Salvador and 3 in Honduras, Nicaragua and Costa Rica.
Fitch Ratings has conducted analysis on the hidden potential of the banking systems of countries in the region.
The prevailing economic environment in Central America is forcing banks to preserve and enhance profitability. The performance of financial systems continues to face pressure from the relatively high credit costs related to the high proportion of loans granted to individuals and small and medium enterprises.
Fitch Ratings believes that improving the level of efficiency in the banking system would result in a notable increase in profits.
The required improvements in efficiency in the banking systems in Central America could have a positive impact on earnings, on the internal generation of capital and, ultimately, on risk ratings, according to a report by Fitch Ratings.
Direct investment by Colombian companies came to about $1 billion in 2010, a giant leap forward compared to the $27 million in 2004.
Central America has become a kind of "Promised Land" for large companies in Colombia, writes ElTiempo.com.
The latest example of large-scale landing in the economies of the isthmus is the recent $801 million purchase of the assets of the HSBC bank in Costa Rica, El Salvador and Honduras by Banco Davivienda.
In the past four years credit card issuance has reduced by 42.4%.
Credit restrictions applied by banks is one of the reasons for the reduction. According to Juan Carlos Arguello, president of the Association of Private Banks of Nicaragua (Asobanp), the downward trend will be maintained.
"According to the Central Bank of Nicaragua (BCN), until 2008 the banking system showed an expansion of plastic money, having more than 300,000 customers.
A Fitch Special Report indicates better positioning in the face of external uncertainty.
SUMMARY
Strengthened Financial Performance:
The banking systems of Central America and the Dominican Republic (hereinafter the region) will continue to strengthen their financial performance as the region continues to recover its rate of GDP growth, estimated at about 4% by 2012 under Fitch’s baseline scenario.
In recent months, 51 financial institutions have joined the Interconnected Payments System (SIP in Spanish).
The system allows users, whether they be natural or legal persons, to make electronic fund transfers between Central American countries, including the Dominican Republic, in US dollars, quickly, safely and inexpensively.
Any amount, however small, can be transferred, stated a the press release from the General Secretariat of Central American Integration System (SICA).
Economy and Development Report by CAF - Development Bank in Latin America -entitled Financial Services for development: promoting access in Latin America.
From the introduction of the first chapter of the report:
Access to financial services - Development and Welfare
Why could access to financial services be an important factor for economic development and welfare in Latin America? A first important aspect is that financial institutions have the mission to attract domestic savings, and possibly also those from external sources, to finance both working capital (liquidity needs) such as business investment (physical capital). Meanwhile, families also require credit to finance investment or expenditure needs (e.g. children's education or purchase of durable goods), whose timing may not coincide with the availability of current income or savings.
Bankers say they are prepared for the tests due to be carried out on entities.
The Nicaragua banking system has strengthened in recent years and should easily pass the financial stress tests it will be submitted to, with the technical assistance of the International Monetary Fund.
So say the banks’ managers, who trust that these tests will allow them to verify the degree of soundness of certain financial indicators and the stability of the system as a whole.
New technologies will be the basis for changes affecting users of financial services in the future.
Accessing your account from Facebook and financing being offered at the time you buy a product are some of the innovations that we could be seeing in the coming years in the banking industry.
This is one of the conclusions from research conducted by experts in technology and financial services applications, which include, among other things, the ability to soon be able to sign agreements using just a smartphone.
Legally registered companies must also report to the tax authorities of the U.S.
This new measure will be taken to comply with the Foreign Account Tax Compliance Law (FATCA, for short), which requires information disclosure by companies where a U.S. citizen is involved.
In addition, banks who hold deposits belonging to North American clients must also report to the Internal Revenue Service (IRS), and entities that do not will be subject to a retention of 30% on the interest and dividends generated.
Financial companies must provide reports about their clients who are United States citizens under penalty of withholding 30% of the transfers that they make from that country.
The measure, which will apply from July 2013, is a consequence of the Law on Foreign Account Tax Compliance (FATCA), which requires foreign banks to sign an agreement with the Internal Revenue Service (IRS), and report this to their customers, U.S.
The financial group Grupo Aval as part of its expansion plans in the region, has announced its intentions to acquire certain assets from HSBC.
Nacion.com reported statements by Luis Carlos Sarmiento, president of Grupo Aval, published in Portfolio,
"We are following everything closely. It seems that HSBC has organized a sale of its assets in some Central American countries, Peru, Uruguay, Paraguay, Chile and Colombia."