El Salvador Opens its Banking System to the World: Analysis of the Repeal of Article 10 of the Banking Law

With 56 votes, the Legislative Assembly eliminated a 27-year restriction that prevented foreign investors from being majority shareholders of banks in El Salvador. We explain what changes, what remains and how it impacts your company.

On March 3, 2026, El Salvador took a historic step in the modernization of its financial regulatory framework: the Legislative Assembly, in its 100th plenary session, approved with 56 votes the repeal of article 10 of the Banking Law. This provision had been in force since 1999 and established nationality restrictions on who could be majority owners of a bank in the country.

For international companies and investors, this reform to El Salvador's Banking Law represents one of the most significant openings to the financial sector in nearly three decades. At Legal Spot we analyze its concrete implications.

What did article 10 of El Salvador's Banking Law establish?

Since the Banking Law came into force in 1999, article 10 imposed a clear restriction on the shareholder structure of Salvadoran banks. Specifically, it required that at least 51% of voting shares belong to:

  • Salvadoran or Central American natural persons.
  • Legal entities incorporated in El Salvador or in Central American countries.
  • Central American or foreign banks that had prudential regulation in their country of origin and an internationally recognized risk rating.

This restriction directly limited foreign investment in the Salvadoran banking sector, conditioning majority participation on criteria of geographic origin and technical qualification. For 27 years, any international financial group that wanted to operate as a bank in El Salvador had to structure intermediate legal vehicles to comply with this requirement, which raised costs, complicated corporate structures and discouraged the entry of new competitors.

What exactly did the Legislative Assembly approve on March 3, 2026?

In plenary session number 100, with 56 votes in favor, the Legislative Assembly of El Salvador approved the full repeal of article 10 of the Banking Law. The stated objective of the decree is to promote competition in financial intermediation, diversify the sources of credit available to citizens and attract cutting-edge banking technology to the national financial system.

According to the approved decree, the regulation enters into force eight days after its publication in the Official Gazette of El Salvador.

What changes for foreign investors?

With the elimination of article 10, the requirement that the majority shareholding of a Salvadoran bank be held by nationals or Central Americans disappears. The specific changes are:

  • Shareholding without origin restrictions. Natural or legal persons of any nationality can now participate as shareholders in Salvadoran banking entities, even as majority shareholders.
  • No need for intermediate legal vehicles. Previously, foreign financial groups had to establish local corporate structures to comply with the 51% requirement. That burden disappears, simplifying and reducing the cost of entering the market.
  • Opening to new global financial players. International banking groups that previously could not establish themselves in El Salvador without meeting the origin restriction now have direct access to the market.
  • Greater competition in the financial system. The entry of new competitors generates pressure to improve credit conditions, rates and services available to companies and citizens.

What does NOT change? Banking supervision remains intact

It is essential to understand that this reform does not imply a deregulation of the banking system. The opening is regarding the origin of investors, not regarding control and transparency standards. The following elements remain fully in force:

Articles 11 and 12 of the Banking Law — Requirements of moral, technical and financial suitability for shareholders.

Superintendency of the Financial System (SSF) — It continues to be the entity that authorizes the acquisition of shares representing more than 1% or 10% of the share capital.

Solvency and integrity requirements — Every investor must demonstrate financial capacity, clean background and technical experience.

Consolidated supervision of financial groups — The SSF maintains its control and coordination powers with international regulators.

In summary: the opening is of origin, not of control. The Salvadoran banking system remains one of the most supervised in the region.

Strategic implications for international companies and investors

This reform does not operate in a vacuum. In the context of the legal framework that El Salvador has built during 2025 and 2026, the repeal of article 10 has concrete strategic implications:

  • New structuring opportunities in the banking sector. Financial groups that previously needed local partners to meet the 51% requirement can now structure their participation directly, reducing costs and operational complexity.
  • Combination with other 2026 reforms. This banking opening adds to the Reform to the International Services Law (Decree No. 497, January 2026), the reforms to the Free Trade Zones Law (Decree No. 493) and the Trade Agreement with the U.S. (January 2026), creating a highly favorable legal ecosystem for investment.
  • Greater access to credit for local companies. The entry of new international banks with greater liquidity and financial technology can translate into better financing conditions for companies operating in El Salvador.
  • Positioning of El Salvador as a regional financial hub. The banking shareholder opening, together with the rest of the 2026 reforms, strengthens the country's positioning as a financial investment destination in Central America.
  • Need to review existing corporate structures. Financial groups already operating in El Salvador under structures designed to comply with the old article 10 can now simplify and optimize their shareholder schemes.

What steps should an interested investor follow?

If your company or financial group has an interest in participating in the Salvadoran banking sector, these are the initial steps of the process:

Step 1. Eligibility analysis. Evaluate whether the investor's profile — solvency, integrity, technical experience — meets the requirements of articles 11 and 12 of the Banking Law.

Step 2. Definition of the participation structure. Determine the shareholding percentage to be acquired or the type of entity to be incorporated (new bank vs. acquisition of participation in an existing bank).

Step 3. Documentation preparation. Compile the documentation required by the SSF: financial statements, integrity certifications, international banking references and corporate structure of the investing group.

Step 4. Authorization process before the SSF. Submit the application to the Superintendency of the Financial System for authorization of the share acquisition, a process that requires specialized legal support.

Step 5. Legal and corporate structuring. Design the optimal corporate structure for the operation, considering tax, regulatory and compliance implications, in line with the current legal framework in El Salvador.

Frequently Asked Questions

Yes. With the repeal of article 10, there is no longer an origin restriction preventing a foreign natural or legal person from being a majority, or even sole, shareholder of a bank in El Salvador. However, the participation must be authorized by the SSF and meet all suitability requirements of articles 11 and 12 of the Banking Law.

No. The repeal only eliminates the origin restriction (the 51% national capital requirement). The Superintendency of the Financial System (SSF) fully retains its supervisory, authorization and control powers. Solvency, integrity and transparency standards remain in force.

The decree was approved on March 3, 2026 and enters into force eight days after its publication in the Official Gazette of El Salvador.

Yes. Both for the acquisition of participations in existing banks and for the incorporation of new banking entities, the nationality restriction of article 10 no longer applies. In both cases, SSF authorization and compliance with current legal requirements are required.

Yes, specialized legal advisory is indispensable. The authorization process before the SSF, corporate structuring, documentation preparation and compliance with articles 11 and 12 of the Banking Law require support from attorneys with experience in financial and corporate law in El Salvador.

Conclusion

The repeal of article 10 of the Banking Law is more than a technical reform: it is a clear signal that El Salvador is actively building a legal ecosystem oriented toward attracting international investment. Combined with the reforms to the International Services Law, the Free Trade Zones Law and the trade agreement with the United States, this banking opening positions the country as one of the most competitive destinations in Central America for global companies and investors.

At Legal Spot we closely follow every regulatory change to offer our clients clear, timely and actionable analysis. If you are interested in evaluating the opportunities this reform opens for your company or financial group, we are ready to accompany you.

Are you interested in investing in El Salvador's banking sector?

At Legal Spot we accompany you at every step of the legal process: from analyzing your structure to obtaining authorization before the SSF. 

This article is for general informational purposes only and does not constitute legal advice. Each business situation must be evaluated individually. For specific advisory, consult at www.legalspotsv.com