Reduction of legal reserve requirements: a convenient tool to face the COVID-19 crisis

In the framework of the health emergency, the Paraguayan Government has issued a series of financial measures with the purpose of collaborating with the current economy.

In this sense, the reduction of the monetary policy rate, the changes in the legal reserve and the refinancing and restructuring of loans are some of the measures implemented by the Central Bank of Paraguay (BCP acronym in Spanish) to support banks and companies that made disbursements to economic agents affected by the spread of COVID-19.

The legal reserve is shown as a suitable tool for the application of monetary policies. But how does it work? The answer is easy: if the legal reserve percentage is reduced, there is an increase in the money supply. Conversely, if the percentage increases, then the money supply decreases.

In the current economic-social scene, the reduction of the legal reserve is a wise measure that allows financial institutions to have more resources to grant loans, which in turn would boost consumption by the population.

Knowing this, the BCP modified the availability of legal reserve in national and foreign currency, through Resolution No. 7 (Act No. 25) and Resolution No. 8 (Act No. 25), both from April 16, 2020, establishing the following:

On deposits in national currency, the following legal reserve rate will be applied:

  • Demand savings deposit: 18%
  • Deposits from 2 to 360 days: 18%
  • Deposits of 361 days or more: 0%

The maximum percentage of legal reserve that could be used on demand deposits and on those deposits with terms of 2 to 360 days, will be 11% of public deposits in each reserve period.

On the deposits in foreign currency, the following legal reserve rate will be applied:

  • Demand savings deposit: 24%
  • Deposits from 2 to 360 days: 24%
  • Term deposits of 361 up to 540 days: 16.5%
  • Deposits of 541 days or more: 0%

The legal reserve on demand deposits, deposits from 2 to 360 days and from 361 to 540 days, may use up to the maximum percentage established as a special reserve of public deposits in each period of legal reserve according to the following picture:


Legal Type Reserve requirement rate on demand deposits from 2 days up to a 360 days term Reserve requirement rate on deposits of 361 days up to a 540 days term
Legal Reserve 15% 15%
Special Legal 9% 1,5%
Total 24% 16,5%

The aforementioned provisions entered into force on April 20, 2020, and will apply until December 31 of this year.

The Operations and Payments Management (Gerencia de Operaciones y Pagos in spanish) of the BCP will be in charge of carrying out the corresponding calculations.

Banks and financial companies may request to the Operations and Payments Management the availability of the resources deposited in the Special Reserve Account, for the granting of loans, as well as for the renewal, refinancing or restructuring of portfolios, intended for sectors economically affected by the spread of COVID-19.

Likewise, the aforementioned resolutions establish that the amount of the disengagement must be less than or equal to the granting, refinancing, or restructuring of the credits. Otherwise, the bank or financial company must return the amount that the Operations and Payments Management indicates.

For more information, contact Larissa Lacout (, attorney for Altra Legal.