COUNTRY PROFILE
Total land area:............................. 20,720 sq. km.
Official language:........................... Spanish
Administrative divisions:..................14 departments
Legal system:................................ Based on civil and Roman law, with traces of
common law; judicial review of legislative acts
in the Supreme Court; accepts compulsory ICJ
jurisdiction, with reservations.
Executive branch:.......................... Chief of state and head of governmentpresident
and vice president, elected for five-year terms by
universal suffrage.
Cabinet Council of Ministers.
Legislative branch:.......................... Unicameral Legislative Assembly (84 seats).
Judicial branch:............................... Supreme Court. Judges are selected by the Legislative
Assembly.ECONOMIC PROFILE
Currency: Salvadoran colón (C)
GDP: US$7.6 billion (1997)
Real GDP growth (at market prices): 4.0 (1997p)
GDP (average annual growth rate): 4.4 (1988-1997)
GDP per capita (1990 US$): 1,293.5 8 (1997)
Consumer price index (average annual growth rate): 4.5% (1997)
Nonfinancial public sector fiscal balance (% of current GDP): 15.5 (1997)
Money supply (M1) (% GDP): 9.0 (1997)
Interest rate (offered by banks and savings and loans associations on nominal time
deposits of 180 days): 11.8 (1997p)
Current account balance: US$0.0959 billion (1997)
Trade balance: -US$1.1 billion (1997)
Main exports: Maquila, coffee, textiles, medicines, paper and cardboard packaging.
Main imports: Industrial sector intermediate groups, capital goods, nondurable goods,
maquila, building materials, durable goods, agricultural sector intermediate goods.
Nominal exchange rate (C/US$) end of period: 8.8 (1997)
Real effective exchange rate (Index 1990=100): 71.3 (1997)BANKING INSTITUTIONS
I. Banking Supervision
1. The Superintendencia del Sistema Financiero is responsible for supervising
the banking system.
2. This entity is an autonomous agency.
3. The supervisory authority reports to the Board of Directors.
4. Banks are examined at least once a year.
5. No formal ratings or grades are used to report bank examination results.
6. Banks are not rated using systems common in most countries, such as CAMEL,
CAMEO or ROCA.II. Consolidated Supervision
1. The supervisory authority performs comprehensive supervision on a consolidated
basis.
2. Prior consent is required to open or close a foreign banking entity in El Salvador.
3. El Salvador requires prior consent from the home country for a foreign bank to
open or close a foreign branch in El Salvador.
4. El Salvador gathers information from its cross-border banking establishments when
agreements with the host country allow such exchanges of information.III. Interest Rates
1. Interest rates on loans are determined by the market.
2. Interest rates on deposits are determined by the market.IV. Deposit Insurance
1. El Salvador has no governmental agency similar to the FDIC in the United States;
however, deposit insurance is a governmental responsibility and is part of
the government's budget.
2. By law, each depositor is guaranteed up to 55,000 colones.V. Trade Finance
1. Trade finance is defined as lines of credit used for finance of pre-export, import
and export of goods.
2. The sovereign does not bear the risk of trade finance vehicles; instead, banking
institutions bear all risk.
3. In cases of bank liquidation, export finance, import finance and pre-export
financeincluding letters of credithave third priority, after staff salaries and taxes.
Working capital finance, capital goods finance, acceptances and drafts have
least priority.VI. Capital Adequacy
1. The minimum capital required to open a bank is 50 million colones.
2. The minimum capital required to maintain a bank in operation is 50 million
colones plus the equity coefficient. Weighted assets range from 8.9% to 10%.
3. Capital adequacy is measured according to the Basle standards.VII. Asset Quality
1. Loans are classified as follows:Loan Classification Definition % of Reserves
Normal A 0
Substandard B 1%
Deficient C 10%
Recovery Improbable D 50%
Irrecoverable E 100%2. Reserve requirements for assets are 10% of loans to foreign banks (for less than
five years), 30% of certified bank checks, 20% of primary issue of securities,
15% of repurchase agreements,10% of guarantees granted in foreign currencies,
and 1% of certificates of investment and agricultural certificates of deposit.
3. The legal lending limits are 50% of net worth with collateral and 15% of net
worth without collateral.
4. Investment portfolios must be categorized according to the following criteria:
available-for-sale portfolio, trade portfolio and to be reported.
5. Investment categories: short and long term. No valuation is needed.
6. Since no valuation is required, the profit and loss statement is not affected.VIII. Liabilities
1. Reserves on liabilities are as follows:Liabilities % of deposits
Checking accounts 30
Savings accounts 20
Time deposits 20
Real estate time deposits 15
Agricultural time deposits 152. Banks can offer demand, savings and time deposits in local and foreign currencies.
3. There is no limit on the amount of deposits banks can accept.
4. There is no limit on the level of concentration for specific types of deposits, such
as broker deposits and affiliate deposits.