On Christmas Eve, Nicaragua’s ruler, Daniel Ortega, proposed a new law that dramatically increases the state’s control over private financial institutions, fundamentally altering the operations of the Central Bank of Nicaragua (BCN) and the Superintendency of Banks and Other Financial Institutions (Siboif). The enactment of this law will place these entities under a unified board of directors overseen by the president of the BCN, Ovidio Reyes, who has been referred to as Ortega’s “superminister.” This move has raised significant concerns about the concentration of power and the potential consequences for Nicaragua’s financial landscape.
Since early last year, Ovidio Reyes has already been wielding significant control over the Ministry of Finance and Public Credit, particularly following the ousting of former minister Ivan Acosta. The current head of the Finance Ministry, Bruno Gallardo, appears to function largely as a formality, as it was Reyes who presented the 2025 National Budget. An anonymous analyst knowledgeable about Nicaragua’s political and economic landscape remarked that this law would greatly expand Reyes’s already formidable power. The analyst stated, “He is practically the second most powerful person in the country, given the authority and control he holds over fiscal and monetary policy.”
Expanding Control and Instilling Fear
From exile, a private businessman experienced in financial regulation offered a perspective that another significant aim of this law is to instill fear and highlight the regime’s repressive capabilities. By placing financial institution executives at risk of removal at the whim of the newly empowered regulatory entity, the law serves as a clear message of the regime’s strength. Additionally, a financial law expert suggests that the law is a mechanism to control the flow of capital into and out of the country at a time when some businesspeople are moving their assets abroad. The regime is determined to prevent capital flight, maintain assets within Nicaragua, and identify those who are transferring funds outwards.
The law not only centralizes governmental control over financial regulation but politicizes it as well, consolidating the dictatorship’s power base. By harnessing these laws, the regime can gather information on individuals it deems adversarial. A particular concern is Article 137, which permits the Superintendency to seek law enforcement assistance when encountering resistance in obtaining information. According to the financial law expert, this represents an unnecessary and excessive escalation, as current laws already allow the Superintendency to intervene and take control of institutions without invoking law enforcement. This provision is viewed as another tool of intimidation within the regime’s arsenal.
Elimination of Banking Secrecy
The elimination of banking secrecy is another pivotal component of this proposed legislation. Article 24, titled “Obligation to Provide Information,” grants authorities arbitrary powers to demand any sort of information, effectively dismantling the privacy of financial data. Critics assert that this provision extends well beyond customary regulatory norms, infringing on economic, financial, and statistical data without limit. According to critics, such extensive access to financial information infringes on the privacy rights of individuals and businesses.
Another alarming provision is detailed in Article 138, “Nullification of Appointments,” which grants the Superintendency the power to dismiss directors, general managers, executives, and internal auditors based solely on criteria that the Superintendency determines. While current laws already permit the dismissal of officials failing to meet legal requirements or engaged in irregularities, the new proposal introduces ambiguous criteria that could subject entire boards and management teams to arbitrary dismissal. This vagueness threatens the stability and independence of private financial institutions.
Impact on Private Banks and Capital Flow
This move against private banks places them in a precarious position, particularly concerning their correspondent banking relationships and international operations. The overarching goal is the regime’s full control over all entities managing significant capital flows, including exporters, importers, and bankers. Since 2018, there has been notable capital flight from Nicaragua, which has prompted the regime to establish this new regulatory infrastructure. This law compels financial entities to follow strict national guidelines, leaving them vulnerable to the interests of the state.
As a result, private financial entities are rendered defenseless against the regime’s sweeping powers. Financial law experts stress that the regime now possesses tools to prosecute individuals and forcefully obtain information while conducting on-site inspections. The new law eliminates the independence of banks as commercial entities, putting any financial institution’s non-compliance with regime dictates at risk of administrative liquidation without legal recourse. Such measures undoubtedly disrupt regular banking operations.
Consolidation of Power and Repression
On Christmas Eve, Nicaragua’s leader, Daniel Ortega, proposed a new law that considerably increases state control over private financial institutions, fundamentally changing how the Central Bank of Nicaragua (BCN) and the Superintendency of Banks and Other Financial Institutions (Siboif) operate. The passage of this law will place these entities under a unified board of directors led by Ovidio Reyes, president of the BCN. Reyes, often referred to as Ortega’s “superminister,” has raised significant concerns about power concentration and the impact on Nicaragua’s financial landscape.
Since early last year, Reyes has held considerable sway over the Ministry of Finance and Public Credit, especially after the removal of former minister Ivan Acosta. The current Finance Ministry head, Bruno Gallardo, seems to be more of a figurehead, with Reyes presenting the 2025 National Budget. An anonymous analyst familiar with Nicaragua’s political and economic landscape noted that this law would greatly increase Reyes’s already substantial power. The analyst commented, “He is practically the second most powerful person in the country, given the authority he holds over fiscal and monetary policy.”