Countries › Paraguay › Guide › 10. Capital markets and finance › Banks and foreign bank branches in Paraguay: licensing a branch, solvency ratios, legal reserve, dividends and prohibited operations

Banks and foreign bank branches in Paraguay: licensing a branch, solvency ratios, legal reserve, dividends and prohibited operations

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Last verified: 2026-10-28 · Status: Stable

Foreign capital in Paraguayan banks and finance companies gets the same treatment as national capital, and a foreign bank may open a branch on the same conditions as a local bank if its home supervisor vouches for it and its head office takes unlimited liability for the branch. Every bank must hold Tier 1 capital of at least 8 percent and total regulatory capital of at least 12 percent of risk weighted assets, build a legal reserve equal to 100 percent of capital out of at least 20 percent of each year's profit, and wait for the Superintendencia de Bancos (or 120 days of silence) before paying dividends. Prudential lending limits are now set by Banco Central del Paraguay (BCP) resolution rather than by statute, and breaches lead to frozen funds at the BCP on top of sanctions.

USD figures use PYG 5,868.31 per US dollar, the Banco Central del Paraguay reference quotation for 28 October 2026. Fines tied to the minimum wage use PYG 3,044,000 per month and PYG 117,077 per daily jornal, in force from 1 July 2026 under Resolución MTESS Nº 670/2026. Conversions are for orientation only.

Key facts

Foreign banks may open branches	Yes, same conditions as local banks plus home supervisor report and unlimited head office liability Ley 861/96 art. 15 and 16, as of 2026-10-28 · in force
Treatment of foreign capital in financial entities	Same as national capital Ley 861/96 art. 7, as of 2026-10-28 · in force
Minimum Tier 1 capital to risk weighted assets	8 %Ley 861/96 art. 56 as amended by Ley 5787/2016, as of 2026-10-28 · in force
Minimum total regulatory capital (Tier 1 plus Tier 2) to risk weighted assets	12 %Ley 861/96 art. 56 as amended by Ley 5787/2016, as of 2026-10-28 · in force
Maximum additional risk capital the BCP may require per entity	3 % of risk weighted assetsLey 861/96 art. 56 as amended by Ley 5787/2016, as of 2026-10-28 · in force
Legal reserve required (built from at least 20% of yearly net profit)	100 % of capitalLey 861/96 art. 27, as of 2026-10-28 · in force
Days after year end for the Superintendencia de Bancos to opine before dividends may be paid	120 daysLey 861/96 art. 30, as of 2026-10-28 · in force

The rule

1. Foreign owners and foreign branches. Foreign investment in financial entities receives the same treatment as national capital. A financial entity incorporated abroad that wants a branch in Paraguay is subject to the same conditions and requirements as a local applicant, as far as they apply, and must file proof of the authorizations required in its home country plus a report from its home banking supervisor on its solvency, asset valuation, orderly management and transparency; the BCP assesses whether home supervision follows international standards and also weighs reciprocity. The branch's legal minimum capital is the permanent, indefinite capital kept and registered in Paraguay, which cannot be lower than the minimum for local entities of the same class, and the head office is jointly and unlimitedly liable for the branch's operations through a board resolution of the parent filed with the application. A branch needs no board but must have at least two attorneys in fact who effectively direct it and meet the same probity, competence and experience tests as bank directors.
Cost to do it: Branch capital at least the indexed minimum for the class: from a 2016 base of PYG 50,000,000,000 (US$8.52 million) for a bank and PYG 25,000,000,000 (US$4.26 million) for a finance company, updated yearly by CPI (Ley 861/96 art. 11 as amended).
Example: A Brazilian bank opening an Asunción branch must radicate at least the indexed bank minimum in Paraguay, appoint two resident managers with attorney powers and file its board's resolution assuming unlimited liability for the branch. / On the 2016 base alone the branch capital would be about US$8.52 million at the 28 October 2026 rate; the indexed figure in force is higher.Ley Nº 861/96 General de Bancos, Financieras y otras Entidades de Crédito, Art. 7, 15, 16 and 17; art. 11 (as reworded by Ley 5787/2016) for the minimum capital amount, 1996-06-24 official text · verified 2026-10-28

2. Solvency ratios. The regulatory capital or solvency index is the generic regulatory capital plus any additional risk capital. Tier 1 capital must be at least 8 percent of risk weighted assets and contingents, and Tier 1 plus Tier 2 at least 12 percent, with the total requirement not exigible above 14 percent; the BCP Board may raise the generic minimum gradually by no more than 1 percentage point a year (0.5 point if risk weights or additional capital were also raised in the same twelve months). On top, the BCP may require additional risk capital for each entity according to its systemic importance or risk profile, capped at 3 percent of risk weighted assets net of provisions. At the 2016 reform, risk weights were fixed at 0 for categories I and II, 0.20 for category III, 0.50 for category IV and 1.00 for category V.
Cost to do it: No fee; the cost is the capital itself. Each extra percentage point of ratio on PYG 1,000,000,000,000 of risk weighted assets means PYG 10,000,000,000 (US$1.70 million) more capital.
Example: A bank with PYG 2,000,000,000,000 of risk weighted assets needs at least PYG 160,000,000,000 of Tier 1 capital and PYG 240,000,000,000 of total regulatory capital. / That bank (about US$341 million of risk weighted assets) needs roughly US$27.3 million of Tier 1 and US$40.9 million of total capital, before any additional risk capital of up to 3 percent.Ley Nº 861/96, art. 56 as reworded by Ley Nº 5787/2016; Ley Nº 5787/2016 art. 2 (transitional weights) and art. 3 (systemically important entities), Ley 861/96 art. 56; Ley 5787/2016 art. 2 and 3, 2016-12-19 official text · verified 2026-10-28 · changed: Ley 5787/2016, promulgated 19 December 2016, replaced the old capital ratio text of art. 56 with the Tier 1 8 percent and total 12 percent structure, the 14 percent ceiling, the yearly increase limits and the additional risk capital of up to 3 percent.

3. Legal reserve and dividends. Financial entities must hold a reserve of at least 100 percent of their capital, built by transferring at least 20 percent of each year's net profit; amounts allocated to the reserve are deductible for income tax. Domestic or foreign credit entities may distribute annual profits only after publishing their balance sheet as required by art. 105, with approval of the shareholders' meeting or of the head office for a branch and the opinion of the Superintendencia de Bancos, provided the Superintendency speaks within 120 days of year end; if it stays silent past that term profits may be distributed. Advance or provisional dividends are expressly prohibited, as are distributions that would breach the ratios of the law, and no entity may distribute profits before amortizing at least 20 percent of its formation expenses and all share sale commissions, accumulated losses and other intangible items. Those who breach the rule are jointly liable to return the amounts.
Cost to do it: Reserve of at least 20 percent of yearly net profit until the reserve equals capital; tax deductible.
Example: A bank earning PYG 100,000,000,000 must move at least PYG 20,000,000,000 to the legal reserve before declaring dividends, and its parent must wait for the Superintendency's opinion or for 120 days after year end. / On US$17 million of profit at least US$3.4 million stays in the reserve; the remaining dividend to a foreign parent then meets the dividend tax described on the taxes pages.Ley Nº 861/96 General de Bancos, Financieras y otras Entidades de Crédito, Art. 27, 30 and 31, 1996-06-24 official text · verified 2026-10-28

4. What banks may do and what they may not. Banks may take sight and term deposits in guaraníes and foreign currency, issue notes, bonds and negotiable certificates of deposit, discount bills, grant loans in local and foreign currency, carry out financial and operating leasing and lend to and borrow from local and foreign banks, among the operations listed in art. 40, subject to BCP regulations. They may not lend against their own shares or shares of other financial entities, lend so that the borrower buys shares of the bank or another financial entity, give guarantees for indefinite or indeterminable amounts or terms, pledge their fixed assets (except for leasing and to the BCP), lend unsecured to their staff, directors and syndics or guarantee them above 0.5 percent of effective equity each and 10 percent in total (up to 1 percent and 20 percent with adequate collateral), or deal with directors and related persons on better terms than with ordinary clients.
Cost to do it: No fee; operations outside the list need BCP authorization.
Example: A Paraguayan bank cannot finance a client's purchase of the bank's own shares or accept those shares as collateral. / A bank with US$100 million of effective equity may lend a director at most US$500,000 without adequate collateral and all insiders together at most US$10 million.Ley Nº 861/96 General de Bancos, Financieras y otras Entidades de Crédito, Art. 40 and 70, 1996-06-24 official text · verified 2026-10-28

5. Prudential limits and the penalty for breaching them. Prudential limits (amounts, percentages and terms that protect solvency and system stability) are set by the BCP according to each entity's risk exposure, rather than by the law. The former statutory caps on credit to related persons, to other banks, to non residents, on leasing, warrants, bond terms, shareholdings and the sale of foreclosed assets (art. 54 and 59 to 69) were repealed in 2016. An entity that breaches a prudential limit has funds frozen in its accounts at the BCP, by a method and term set by general resolution, in addition to any sanctions.
Cost to do it: Frozen funds at the BCP for the term set by BCP general resolution, plus sanctions under the BCP charter.
Example: A lender relying on an old memo that cites the 5 percent cap for loans to non residents (former art. 63) is using a repealed rule; the current limit is in BCP prudential regulations. / A US$10 million exposure to a single foreign group must be checked against the BCP's prudential limits, not the repealed statutory percentages.Ley Nº 861/96, art. 58 and 71 as reworded by Ley Nº 5787/2016; Ley Nº 5787/2016 art. 4 (repeals), Ley 861/96 art. 58 and 71; Ley 5787/2016 art. 4, 2016-12-19 official text · verified 2026-10-28 · changed: Ley 5787/2016 art. 4 repealed Ley 861/96 art. 54 and 59 to 69 and Ley 4851/2013, and reworded art. 58 (limits set by the BCP) and art. 71 (immobilization of funds).

6. Bank secrecy and the BCP information centre. Financial entities, their directors and staff may not disclose client operations without written authorization, subject to the exceptions in art. 86 (BCP and its supervisors, courts in cases where the client is a party, the Comptroller, the tax and customs heads within a specific taxpayer check, and the prosecution service, among others). The BCP runs a Central de Información in the Superintendencia de Bancos with client data for the financial system, may agree with public or private entities of similar functions to exchange credit information used only for risk decisions, and may charge a fee for access.
Cost to do it: Access to the Central de Información may carry a BCP fee (art. 91); amount set by the BCP and not reproduced here.
Example: A foreign parent asking its Paraguayan bank subsidiary for named client files needs the clients' written consent; aggregated data are not covered by secrecy. / Group reporting to a head office abroad should use aggregated data unless each client has signed a waiver.Ley Nº 861/96, art. 84 and 85; art. 86, 89 and 91 as reworded by Ley Nº 5787/2016, Art. 84, 85, 86, 89 and 91, 2016-12-19 official text · verified 2026-10-28

Item	Rule	Norm
Minimum capital, bank	PYG 50,000 million 2016 base, CPI indexed (about US$8.52 million on the base)	Ley 861/96 art. 11
Minimum capital, finance company	PYG 25,000 million 2016 base, CPI indexed (about US$4.26 million on the base)	Ley 861/96 art. 11
Foreign branch capital	Not below the minimum for its class; head office unlimited liability	Ley 861/96 art. 16
Tier 1 ratio	At least 8% of risk weighted assets	Ley 861/96 art. 56
Total capital ratio	At least 12%, not exigible above 14%	Ley 861/96 art. 56
Additional risk capital	Up to 3%, raised by at most 1 point a year	Ley 861/96 art. 56
Legal reserve	100% of capital, at least 20% of yearly profit	Ley 861/96 art. 27
Dividends	After publication, shareholder or head office approval and Superintendency opinion within 120 days	Ley 861/96 art. 30
Prudential limits	Set by BCP resolution; breach freezes funds at the BCP	Ley 861/96 art. 58 and 71

Bank capital and payout rules (BCP rate PYG 5,868.31 per US$, 28 Oct 2026)

Worked example

A foreign bank weighing a branch against a subsidiary: both need at least the indexed bank minimum capital (2016 base PYG 50,000,000,000 (US$8.52 million)). The branch has no board but needs two qualified attorneys and an unlimited guarantee from the head office (Ley 861/96 art. 16 and 17); a subsidiary needs a board of a president and at least four directors (art. 35) but ring fences the parent's liability to its equity.
Profit of PYG 50,000,000,000 (about US$8.52 million) in a bank whose reserve is still below its capital: at least PYG 10,000,000,000 (about US$1.70 million) goes to the legal reserve, and the balance can be paid out only after the balance sheet is published and the Superintendency gives its opinion or lets 120 days pass from year end (Ley 861/96 art. 27 and 30).

Step by step

1. Decide between branch and subsidiary: compare the head office's unlimited liability for a branch (Ley 861/96 art. 16) with the board and governance requirements of a local company (art. 35).
2. Gather the home country authorizations and the home supervisor's report on solvency and management, and prepare evidence of reciprocity (art. 15).
3. Fund the indexed minimum capital in cash in Paraguay and register it; for a branch, file the parent board resolution assuming unlimited liability.
4. Appoint at least two attorneys for a branch, or the board for a subsidiary, who pass the BCP fit and proper tests.
5. Once licensed, model Tier 1 of 8 percent and total capital of 12 percent plus any additional risk capital the BCP sets, and check every large exposure against the BCP prudential limits.
6. Each year, allocate at least 20 percent of profit to the legal reserve, publish the balance sheet, and diarise the 120 day window for the Superintendency's opinion before paying dividends.

Common traps

Statutory lending caps found in older guides (credit to non residents at 5 percent of effective equity, related party caps in art. 59, interbank limits in art. 60 and 61) were repealed by Ley 5787/2016 art. 4; use the BCP's prudential regulations instead.
A branch is not a ring fence: the head office answers jointly and without limit for the branch's operations (Ley 861/96 art. 16).
Interim dividends are banned outright for financial entities (Ley 861/96 art. 30), which differs from the rules for ordinary companies and from many home jurisdictions.
Breaching a prudential limit freezes cash at the BCP even before any sanction is imposed (Ley 861/96 art. 71 as amended).
The BCP can raise the generic capital requirement and add up to 3 percent of entity specific capital, so business plans should not assume the 12 percent floor stays fixed.

Sources

← Capital markets, banking and credit in Paraguay: the Central Bank as single supervisor, bank licences and capital, the new securities law, interest rate ceilings and tax on interest paid abroadDeposit guarantee and bank resolution in Paraguay: the 75 minimum wage cover, quarterly contributions, regularization plans and why banks cannot go bankrupt →

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