Norm for the Granting of Temporary Credit Conditions

Page 1 of 10 Resolution No. CD-SIBOIF-1181-1-JUN19-2020 Dated June 19, 2020

NORM FOR THE GRANTING OF TEMPORARY CREDIT CONDITIONS

The Board of Directors of the Superintendent of Banks and Other Financial Institutions,

CONSIDERING

I

That in accordance with what is established in Article 10, numeral 1) of Law No. 316, Law of the Superintendent of Banks and Other Financial Institutions, published in La Gaceta, Official Diary No. 196, of October 14, 1999, and its reforms, contained in Law No. 974, Law of the Nicaraguan Legal Digest of the Banking and Finance Sector, published in La Gaceta, Official Diary No. 164, of August 27, 2018, and its reforms (Legal Digest Law), it corresponds to the Board of Directors of the Superintendent of Banks and Other Financial Institutions to issue general norms to strengthen and preserve the security and confidence of the public in the institutions under the supervision, inspection, surveillance, and audit of the Superintendent.

II

That based on the faculty established in the previous consideration and in order to mitigate the negative effects that could be generated given the international health situation, it is appropriate to adopt extraordinary measures to mitigate the aforementioned negative effects and allow the rehabilitation of activities that generate resource flows and the orderly recovery of loans granted by financial institutions.

III

That according to the considerations previously stated and based on the faculty established in Article 3, numerals 3) and 13), and Article 10, numeral 7), of the aforementioned Law 316, Law of the Superintendent of Banks and Other Financial Institutions, and its reforms; contained in the Legal Digest Law.

In exercise of its faculties,

HAS ISSUED

The following,

Resolution No. CD-SIBOIF-1181-1-JUN19-2020

NORM FOR THE GRANTING OF TEMPORARY CREDIT CONDITIONS

CHAPTER I GENERAL PROVISIONS

Article 1. Concepts.- For the purposes of application of the provisions contained in this norm, the concepts indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a) Institution or Financial Institution: Banks, financial companies, and insurance companies, subject to the authorization, regulation, and supervision of the Superintendent of Banks and Other Financial Institutions, unless reference is made specifically to any of the aforementioned entities.

b) Accounting Framework: Accounting framework applicable to Banking Institutions, Financial Institutions, and Insurance, Reinsurance, and Surety Companies.

c) NGRC: Norm on Credit Risk Management, contained in Resolution CD-SIBOIF-547-1-AGO20-2008, published in La Gaceta, Official Diary No. 176 and 178, of September 11 and 17, 2008, and its reforms.

d) Temporary Norm for the Deferral of Provisions: Temporary Norm for the Deferral of Provisions for Credit Portfolios and for the Treatment of Assets Received in Credit Recovery, contained in Resolution CD-SIBOIF-1111-1-MAY7-2019, published in La Gaceta, Official Diary No. 104, of June 4, 2019.

e) Minimum Payment: Corresponds to the payment of the cycle expressed in the agreed currency, which covers amortization of no less than the percentage of principal balance, plus current and delinquent interest, established in the regulation governing the matter on credit card operations.

f) Superintendent: Superintendent of Banks and Other Financial Institutions.

g) Superintendent: Superintendent of Banks and Other Financial Institutions.

Article 2. Object.- This norm aims to establish temporary credit conditions that financial institutions may grant to debtors of credit cards, vehicle loans, personal loans, housing mortgages, microcredits, SMEs, agricultural, livestock, industrial, and commercial loans in all sectors of the economy.

Article 3. Scope.- The provisions of this norm are applicable to financial institutions that grant loans in the modalities indicated in the previous article.

CHAPTER II TEMPORARY CREDIT CONDITIONS

Article 4. Conditions.- Financial institutions may defer installments and/or extend the originally agreed payment term of the loans referred to in Article 2 of this norm, for which purpose, they must carry out an individual evaluation of each case based on the institution's own policies; without modifying the other originally agreed conditions, unless these are for the benefit of the debtor, provided they meet the following conditions:

a) They shall be granted only to those loans that on March 31, 2020, were classified as A or B, and were registered as active, extended, or restructured loans.

b) Loans subject to this norm will maintain the accounting classification they had on March 31, 2020.

c) Loans modified in accordance with what is established in this norm will maintain the risk rating they had on March 31, 2020, provided that the debtor does not breach the new agreed conditions, as in that case, the financial institution must reclassify the loan in accordance with the NGRC and the applicable Accounting Framework.

d) Financial institutions, based on the provisions established in their own contracts and the legal risk management that corresponds to them, must assess whether to apply the criteria established in this norm, they must or must not modify the original contracts, substantiating their decision in the credit file.

Article 5. Credit Cards.- At the request of cardholders, the financial institution may negotiate the credit card balance under more favorable new conditions through a personal loan, in accordance with the terms established in Article 4 of this norm.

Article 6. Formalization Criteria.- Loans subject to the temporary credit conditions established in this norm shall be governed by the following criteria at the time of their formalization:

a) The modification of loans shall be exempt from the application of commissions, with the exception of legal, notarial, and registration expenses, among others paid to third parties.

b) The modification of loans shall also be exempt from the requirement of updating the appraisal, when applicable.

Article 7. Grace Period.- Financial institutions may grant initial grace periods of up to 6 months of principal and/or interest within the term extensions that financial institutions grant to their debtors as established in Article 4 of this norm. The same treatment may be applied for the minimum payment of the credit card.

The principal and interest installments of the grace period may be redistributed over the remaining term of the loan, in a different term, or through a global payment (also known as a balloon) at the end of the original term of the loan, according to the criteria of each financial institution. In no case shall interest be charged on unpaid interest.

Article 8. Treatment of Provisions.- The application of the temporary credit conditions indicated in this norm shall not imply for financial institutions a decrease or liberalization of the provisions already constituted as of the date of formalization of the loan modification. In case there is an excess of provisions due to improvement in classification or cancellation of the loan, the provisions must be used for the constitution of a "Fund for Generic Provisions for Temporary Credit Conditions". The constitution of this Fund must be accounted for separately from the rest of generic provisions, and may be used for the constitution of specific provisions for new loans, linearly, over a period of 24 months, from the end of the validity of this norm.

Article 9. Restrictions.- For the purposes of application of this norm, the following restrictions are established:

a) Temporary credit conditions may benefit the debtor in all their obligations on a single occasion, and shall not apply to new loans granted after March 31, 2020.

b) Banks and financial companies with loans covered by this norm must maintain a capital adequacy equal to or greater than 13%.

c) During the following three years counted from the validity of this norm, the Superintendent may evaluate requests for profit distribution by banks and financial companies that adhere to it, when they present indicators of improvement in the loan portfolio, increase in public deposits, and compliance with banking regulation, among other variables.

d) Banks with loans covered by this norm must constitute a Patrimonial Reserve, in account 45010202 "Reserves for Renegotiation of Debts", with the accumulated audited profits as of December 31, 2019 (accumulated results of previous exercises available); transferring the amount of profits resulting from applying the following percentages to the balances of the portfolio benefited with the temporary credit conditions:

1. For banks whose individual gross portfolio is equal to or greater than 15% of the total gross portfolio of the National Financial System as of March 2020, they must retain in reserves 30% of the benefited portfolio.

2. For banks whose individual gross portfolio is less than 15% of the total gross portfolio of the National Financial System as of March 2020, they must retain in reserves 20% of the benefited portfolio. In the case of banks that cannot use their accumulated profits available as of December 31, 2019, they may apply the provisions of this norm provided they constitute a patrimonial reserve of 20% of the portfolio to be benefited, either with capital contributions or reduction of social capital, if they had excess, ensuring compliance with the minimum social capital and the capital adequacy index indicated in letter b) of this article.

The Patrimonial Reserve referred to in this clause may be used in accordance with the authorization and procedures defined by the Superintendent; likewise, said Reserve does not count for purposes of capital adequacy.

The provisions of this clause shall not be applicable to financial companies nor to insurance companies.

e) Loans in which diversion of funds and/or guarantees for other activities that were not the object of the loan are evident, shall not apply to this norm.

f) In case loans are reclassified by the Superintendent, the financial institution must immediately constitute 100% of the provisions that correspond in accordance with the NGRC.

g) Financial institutions shall not grant temporary credit conditions to loans with related parties.

h) Loans subject to the Temporary Norm for the Deferral of Provisions shall not benefit from the temporary credit conditions established in this norm, unless the financial institution constitutes the provisions pending to be constituted in accordance with the risk classification that the loan has at the time of applying this norm, that is, if on March 31, 2020, the loan was A or B and at the time of applying the norm its classification is C, it must constitute the provision corresponding to C.

Article 10. Policies and Controls.- Financial institutions must establish the necessary credit policies, procedures, and controls to ensure compliance with the conditions established in this norm, as well as the implementation of information systems that allow the identification and monitoring of loans subject to temporary credit conditions.

CHAPTER III FINAL PROVISIONS

Article 11. Deadline for Requests.- Requests made by debtors in accordance with the conditions established in this norm and their respective formalizations and registrations in the financial institution's systems shall have a maximum date of December 31, 2020.

Article 12. Information to the Superintendent.- Financial institutions must send to the Superintendent within the first five (5) business days after the close of each month, a detail of the debtors to whom they have applied temporary credit conditions, during the month in which it was carried out, detailing the minimum information required in the Annex that is an integral part of this norm. Said Annex must be sent electronically.

With the purpose of keeping the credit history of debtors of financial institutions updated, based on the information referred to in the previous paragraph, the Superintendent will identify in the Risk Central those debtors who have been benefited with temporary credit conditions.

Article 13. NGRC Application.- For aspects not contemplated in this norm, what is established in the NGRC shall apply.

Article 14. Modification of Annex.- The Superintendent is authorized to modify the annex contained in this norm, to the extent that its application so requires, informing the Board of Directors about such modifications.

Article 15. Validity.- This norm shall enter into force from its notification. (F) Ovidio Reyes (F) Illegible (Luis Ángel Montenegro E) (F) Fausto Reyes (F) Illegible (Silvio Moisés Casco Marenco) (F) Illegible (Ervin Antonio Vargas Pérez) (F) Illegible (Secretary).

SAUL CASTELLON TORREZ Ad Hoc Secretary of the Board of Directors SIBOIF

Page 7 of 10 Institution Name: ____________________ Figures as of: __________________________________ Formalization Date_Formalization name 3/ id_tipo_documento 3/ id_persona 3/ id_credito 3/ id_estado_credito 3/ id_moneda 3/ id_Credito_anterior (Relieved Loans) id_situacion_credito 3/ id_tipo_credito 3/ id_modalidad_credito 3/ balance of the Benefited Portfolio 1/ Reserve constituted 2/ provision 3/ id_clasificacion_credito 3/ grace_period grace_period_end_date Term_relief relief_end_date id_situacion_alivio 1/ This is calculated considering the principal balance plus interest registered in the balance sheet minus the liquid guarantees of the loan 2/ This is calculated on the balance of the benefited portfolio considering the percentages defined in the Norm 3/ The information of required fields in this report must correspond to the information in the fields sent in the CDR, where applicable. I. ANNEX INFORMATION ON LOANS WITH TEMPORARY CREDIT CONDITIONS Complete Figures in Córdobas (Relieved Loans of the Month) Note: For filling out the report, take into account the description of the fields established in the instruction. Natural or Legal Person Loan

Page 8 of 10 I.a. ANNEX INSTRUCTION ON LOANS WITH TEMPORARY CREDIT CONDITIONS Order Field Description Catalog 1 Date_Formalization Date on which the loan was formalized with the new temporary credit conditions. 2 name Indicates the name or trade name of the natural or legal person, national or foreign, which must be in correspondence with the identification document presented by the same. In the case of natural persons, they must report first the first names and then the surnames. 3 id_tipo_documento Indicates the description of the type of document that corresponds to the identification used by the natural or legal person, national or foreign, who maintains some type of relationship (debtor, guarantor, surety, acquirer of adjudicated assets, related party, linked with the related party, shareholder, employee) with the financial institution; in accordance with the corresponding catalog, established in the Transaction Manual of the Risk Central. id_tipo_documento 4 id_persona Number of the identification of the natural or legal person, national or foreign, who maintains a credit operation, with the new temporary credit conditions, in the institution. 5 id_credito Corresponds to the reference number assigned to the credit operation, by the financial institution. For purposes of credit cards, this will correspond to the account number of the holder. 6 id_estado_credito Corresponds to the description that identifies the state in which the loan is found, at the month-end reported. In accordance with the corresponding catalog, established in the Transaction Manual of the Risk Central. id_estado_credito 7 id_moneda Corresponds to the description that identifies the currency agreed for the credit operations, in accordance with the corresponding catalog, established in the Transaction Manual of the Risk Central. id_moneda 8 id_credito_anterior (relieved loans) Corresponds to the reference number of a previous credit operation or procedure, which is related to a new reference number. All reference numbers assigned to the credit operation must be included, separated by commas.

Page 9 of 10 9 id_situacion_credito Corresponds to the description that identifies the accounting situation of the loan reported at month-end, in accordance with the corresponding catalog, established in this Transaction Manual of the Risk Central. id_situacion_credito 10 id_tipo_credito Corresponds to the description that identifies the type of loan, in accordance with the Norm on Credit Risk Management, in accordance with the corresponding catalog, established in the Transaction Manual of the Risk Central. id_tipo_credito 11 id_modalidad_credito Corresponds to the description that identifies the modality of the loan granted by the financial institution; in accordance with the corresponding catalog, established in the Transaction Manual of the Risk Central. id_modalidad_credito 12 balance of the Benefited Portfolio 1/ Corresponds to the balance of the principal plus Interest minus the liquid guarantees of the loan at the close of the reported month. 13 Reserve constituted 2/ Corresponds to the calculation on the balance of the benefited portfolio considering the percentages defined in the Norm; at the close of the reported month. 14 Provision Amount of the loan provision determined by the financial institution at month-end, in accordance with what is established in the Norm. 15 id_clasificacion_credito Corresponds to the category of the loan classification made by the financial institution in accordance with what is established in the Norm and with the corresponding catalog established in the Transaction Manual of the Risk Central. id_clasificacion_credito 16 Grace_Period Corresponds to the grace period, in months, of principal and/or interest within the term extensions that financial institutions grant to their debtors in accordance with the Norm. 17 grace_period_end_date Corresponds to the date on which the grace period authorized by the financial institution will expire, in accordance with the Norm. 18 Term_relief Corresponds to the extension of the term, in months, that the financial institution grants to its debtors, in accordance with the Norm. 19 relief_end_date Corresponds to the date on which the term extension authorized by the financial institution to its debtors will expire, in accordance with the Norm. 20 id_situacion_alivio Corresponds to the description that identifies the type of relief, according to the Norm, in accordance with the corresponding catalog. id_situacion_alivio

Page 10 of 10 I.b. ANNEX General Catalogs Related Table Code Description id_situacion_alivio 1 Term Extension 2 Term Extension and/or other conditions