Published and draft legislation - Costa Rica

Corporate Governance Regulation

National Supervisory Board of the Financial System

The National Supervisory Board of the Financial System (Conassif) has issued a set of regulations laying down the international standards and principles that should be incorporated into the corporate governance strategies of the entities it supervises.

On the basis of such principles, each entity will design, implement and assess its corporate governance framework, taking into account its ownership structure and legal status, the scope and complexity of its operations, its corporate strategy, its risk profile and the potential impact its operations have on third parties, always respecting the regulations governing the national financial system.

The regulations will be applicable to the entities supervised by the supervisors of financial institutions, the securities markets, insurance and pensions: Superintendencia General de Entidades Financieras (SUGEF), Superintendencia General de Valores (SUGEVAL), Superintendencia General de Seguros (SUGESE), Superintendencia de Pensiones (SUPEN) as well as financial conglomerates and group-holding companies.

The regulations are divided into nine chapters:

Chapter I. General Provisions: these establish the aims, scope and proportional application of the principles established, according to certain specifications of the institutions affected, with a list of definitions.

Chapter II. Board of Directors: This chapter is divided into eight sections:

  • Section I. General responsibilities: the Board of Directors is responsible for the strategy, the management of risks, and the financial robustness and solvency, the internal organisation and structure of corporate governance for the entity.
  • Section II. Corporate culture and values: the entities must adopt a sound corporate culture, and approve a code of conduct that should be known and applied by all those working within the organisation.
  • Section III. Risk appetite: the Board of Directors will be responsible for approving and upholding a risk management strategy and a risk appetite framework for the entity. This must be communicated to all stakeholders by a “Risk Appetite Statement”.
  • Section IV. Supervision of Senior Management: the performance of the senior management will be overseen by the Board of Directors.
  • Section V. Composition and profile of the Board of Directors: the number of members and the composition of the Board of Directors must be appropriate, with at least two independent directors. It will take into consideration that the members chosen should have experience, know-how and other attributes that make them proactive, with good judgement, ability to teamwork and sufficient time available to devote to the performance of their duties. It is fundamental that the recruitment and appointment of candidates be clear, formalised and rigorous, and that there is a succession plan.
  • Section VI. Structure and practices of the Board of Directors: the Board should be structured with suitable leadership, size and with committees constituted according to its needs. Following the latest tendencies in corporate governance, the regulations establish annual assessment of the performance of the Board of Directors, its members and its committees.
  • Section VII. The Role of the Chair: The Chair is responsible for the correct running of the Board of Directors.
  • Section VIII. Conflicts of interest: the entity should adopt a policy to identify, avoid and manage conflicts of interest.

Chapter III. Technical Committees

The Board of Directors, in order to best perform its functions, must set up Technical Audit, Risks, Appointments and Remuneration Committees, to help them with the matters falling within their scope. Each committee constituted must have its own set of regulations governing its duties, composition and other specifications regarding how it will operate.

Pursuant to general principles of good governance, the regulations establish that the Audit and Risks Committees should be chaired by independent directors, and that the Appointments and Remuneration Committees should each include at least one independent director among their members.

Chapter IV. Senior Management

The senior management, under the oversight of the Board of Directors, is responsible for managing the activities of the entity in a manner suitable to the business strategy, risk appetite and policies approved by the Board of Directors. Consequently, the members of the senior management must have the experience, skills and repute required to perform their duties.

Chapter V. Risk Management, Compliance and Control

To ensure integrity, transparency and good governance, the entities must have an effective internal control and risk management system.

Those in charge of these functions will be appointed by the Board of Directors, to which they will report directly, and they will have sufficient status, independence, resources and authority within the organisation to perform their duties.

Chapter VI. Remuneration, Transparency and Accountability

Pursuant to best international practices, the regulations establish that each entity’s remuneration system must be in line with its strategy, activity, targets, values and risk appetite.  Consequently, it should be based on good performance, encouraging acceptable risk-taking behaviour and reinforcing the culture. The Board of Directors is responsible for establishing mechanisms to foster transparency in the remuneration and rewards systems of the entity, and any information on this policy that may be relevant to its stakeholder (ownership of shares, audited financial statements, information on the Board of Directors, etc).

Chapter VII. Corporate Governance of Financial Conglomerates and Groups

The regulations establish that the Board of Directors of the holding company is responsible for the  corporate governance of the group as a whole.

Chapter VIII. Owners of Shares Traded on the Stock Exchange

This chapter regulates the rights of shareholders, and especially the right to equitable treatment, including minority holders and foreigners.

Chapter IX. Final Provisions

Regarding the corporate governance of foreign branches, reporting lines and agreements with the Supervisor, repeal of the regulations from prior to 2009 and the entry into force of the new regulations six months after their publication in the official gazette, ie, on 7th December 2016.