The new regulation allows financial institutions to use up to 30% of their reserve balances in local currency and 20% in foreign currency, providing greater flexibility in liquidity management.
The Central Bank of Paraguay (BCP), through Resolution No. 1, Act No. 45, dated October 8, 2026, revised the parameters governing financial institutions' use of their mandatory reserve balances.
The new limits allow institutions to use up to 30% of their reserve balances in local currency and 20% in foreign currency.
The resolution amends the parameters established in Article 6 of the Regulation on Reserve Requirements in Local and Foreign Currency and repeals Resolutions No. 14 and No. 15, Act No. 8, dated January 29, 2015.
Why have the limits been revised?
Reserve requirements are among the main instruments used by central banks to regulate liquidity in the financial system. Beyond their prudential function, they can also play an important role in helping financial institutions manage temporary liquidity needs.
Through this amendment, the BCP aims to provide institutions with greater autonomy and flexibility in managing their resources, particularly in response to short-term liquidity fluctuations.
The decision also incorporates recommendations from an International Monetary Fund (IMF) technical assistance mission aimed at strengthening the role of reserve requirements in absorbing these fluctuations.
What does this mean for banks and finance companies?
The revised limits give institutions greater flexibility to use their mandatory reserve balances within the percentages authorized by the BCP.
From an operational perspective, this may help institutions manage temporary liquidity needs and provide additional flexibility in treasury decisions.
However, the amendment does not remove other applicable prudential obligations. Financial institutions must continue to maintain appropriate liquidity risk management, monitoring and control mechanisms.
From a legal perspective, institutions will also need to assess whether updates to their internal liquidity policies, treasury procedures and control mechanisms are necessary, taking into account the operational and accounting regulations to be issued by the BCP.
Effective date and implementation
The resolution took effect on October 8, 2026, and applies to financial institutions subject to mandatory reserve requirements.
It also instructs the BCP's General Management to regulate the operational and accounting aspects of the measure, while the Superintendency of Banks will oversee compliance.
The amendment highlights the importance of a regulatory framework that balances financial stability with operational efficiency as Paraguay continues to modernize its financial regulations.
