Technical Standards to Determine the Companies That May Form Part of Financial Conglomerates

CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

THE NORMS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That Article 24 of the Banks Law establishes that banks may invest in shares of Salvadoran capital companies, subject to authorization by the Financial System Superintendence.

II. That Article 113, sixth paragraph of the Banks Law, establishes the companies that may integrate a financial conglomerate, which must be duly supervised by the Financial System Superintendence.

III. That Article 113, seventh paragraph of the Banks Law establishes that, likewise, controlling companies constituted abroad that operate in those markets or entities of the financial sector similar to those described in said article may integrate the conglomerate, all duly regulated and supervised in their respective countries.

IV. That Article 114 of the Banks Law establishes that the Financial System Superintendence, through a general resolution, may authorize other types of financial sector entities to form part of financial conglomerates, provided there is no express legal prohibition against it.

V. That Article 7, letter c) of the Law on Supervision and Regulation of the Financial System establishes that companies that integrate financial conglomerates, or that the Superintendence declares as such, are subject to the provisions of said law and therefore to the supervision of the Financial System Superintendence, which includes both their controlling companies and their member companies.

THEREFORE,

in virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System,

AGREES to issue the following:

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CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES

Object
Art. 1.- These Standards aim to establish the characteristics and requirements that companies must meet to be authorized by the Financial System Superintendence to integrate financial conglomerates in El Salvador.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the companies interested in integrating or forming part of financial conglomerates in El Salvador.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Conglomerate: Set of companies characterized by the fact that more than fifty percent of their respective share capital is owned by a controlling company, which is also a member of the conglomerate; c) Controlling Company: Company whose exclusive purpose will be the investment in more than fifty percent of the capital of the entities referred to in Article 113 of the Banks Law; d) Exclusive Purpose Controlling Company: Companies that own at least fifty percent of the shares of other companies and whose purpose is solely the investment in shares of other companies in the financial system; e) Law: Banks Law; and f) Superintendence: Financial System Superintendence.

CHAPTER II
CHARACTERISTICS AND REQUIREMENTS OF COMPANIES

Types of companies to integrate a financial conglomerate Art. 4.- Companies described in Article 113 of the Law may integrate a financial conglomerate. As well as the companies contemplated in Article 24 of the Law and those authorized by the Superintendence in the exercise of the powers conferred in Article 114 of the same.

Characteristics of companies to integrate a financial conglomerate Art. 5.- A company to be considered as part of a financial conglomerate

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CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

must meet the characteristics established in Articles 113 and 114 of the Law, as follows:
a) Be capital companies; b) Be of the financial sector; c) There must be no express prohibition for them to form part of the financial conglomerates of El Salvador; d) That the exclusive purpose controlling company or the controlling bank have invested or can invest more than fifty percent in the share capital of the issuer; e) When dealing with foreign companies, these must be duly regulated and supervised in their respective countries; and f) That the share investments of the exclusive purpose controlling company or the controlling bank comply with regulations on ownership and other legal provisions.

Exclusive purpose controlling companies and controlling banks constituted in El Salvador, which have an interest in investing in any of the types of companies described in the first paragraph of this article, must request the corresponding authorization from the Superintendence and comply with the applicable regulation.

CHAPTER III
FORMATION AND MODIFICATION OF THE FINANCIAL CONGLOMERATE

Request for authorization of formation or modification Art. 6.- To receive authorization for the formation or modification of a financial conglomerate, a request signed by the President of the Exclusive Purpose Controlling Company must be submitted to the Superintendence, attaching the following information:
a) Certification of the minutes of the Board of Directors meeting in which the Agreement for the formation or modification of the Financial Conglomerate was taken, including the following:
i. Name; and
ii. Detail of the companies that will form it.
b) Authorization document issued by the Head Office, when applicable; c) Structure of the Financial Conglomerate to be constituted; in case of modification, the before and after of its formation; d) Share composition of each of the companies that will integrate the financial conglomerate; and e) In the case of foreign banks, the following information must also be presented:
i. Deed of incorporation, statutes, and any other document that proves the legal existence of the bank;

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CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

ii. Certificate issued by the competent authority, stating that the foreign bank is authorized to operate as a bank in the country of origin;  
iii. Agreement to commit to forming part of the analysis units to determine the solvency of the financial conglomerate; and  
iv. Credentials of the Bank's Board of Directors.

The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the time limit referred to in the first paragraph of Article 7 of these Standards will begin to run from the next business day after the request has been submitted.

Procedure for authorization of formation or modification Art. 7.- Upon receipt of the request for authorization for the formation or modification of a financial conglomerate in accordance with Article 6 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Law and these Standards, having a maximum time limit of up to twenty business days for the authorization or denial of the corresponding request.

If the request is not accompanied by the complete and properly formatted information detailed in Article 6 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the applicant to present the missing documents within a time limit of ten business days counted from the day following notification, a time limit that may be extended at the request of interested parties when there are reasons justifying such extension.

The Superintendence, in the same notice, will indicate to interested parties that if they do not complete the information within the aforementioned time limit, it will proceed without further procedure to archive the request, reserving their right to submit a new request.

If after analyzing the documentation presented in accordance with Article 6 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be proven, the Superintendence will notify the respective applicant to remedy the deficiencies communicated or present additional documentation or information as required.

The applicant will have a maximum time limit of ten business days counted from the day following notification, to resolve the observations or present the additional information required by the Superintendence.

The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the time limit indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires.

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CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

Extension of Time Limit
Art. 8.- The applicant may submit a request for extension of the time limit indicated in the fifth paragraph of Article 7 of these Standards to the Superintendence before the expiration of said time limit, stating the grounds for the request and proposing, if applicable, the relevant evidence.

The extension time limit may not exceed ten business days and will begin from the next business day following the expiration date of the original time limit.

Suspension of Time Limit
Art. 9.- The twenty business day time limit indicated in the first paragraph of Article 7 of these Standards will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendence are remedied.

Modifications in Documentation
Art. 10.- If during the time limit referred to in the first paragraph of Article 7 of these Standards, any change occurs in the information or documentation presented to the Superintendence in accordance with Article 6 of these Standards, applicants must send the updated information to the Superintendence within five days following the occurrence of the change.

Cooperation Memorandum
Art. 11.- Prior to granting the respective authorization, the Superintendence will sign a cooperation memorandum with the supervisory authority of the country of the foreign bank in question, in order to coordinate the exchange of information and the mechanisms that enable consolidated supervision, ensuring the confidentiality of such information.

Resolution
Art. 12.- Once the complete and properly formatted documentation has been presented, the Superintendence will respond to the request for authorization for the formation or modification of a financial conglomerate through a resolution.

The Superintendence will proceed to communicate the corresponding resolution to the applicant within a maximum time limit of three business days, from the date of issuance of the same.

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CNBCR-06/2024	NRP-79
Approval: 15/08/2024	TECHNICAL STANDARDS TO DETERMINE THE COMPANIES THAT MAY FORM PART OF FINANCIAL CONGLOMERATES
Validity: 30/08/2024

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Regarding investment in Salvadoran companies and subsidiaries and offices in foreign countries Art. 13.- Exclusive purpose controlling companies and controlling banks, constituted in El Salvador, which have an interest in investing in any of the types of companies described in Article 4 of these Standards, must request the corresponding authorization, based on the "Standards to Authorize Banks and Exclusive Purpose Controlling Companies to Make Share Investments in Salvadoran Companies (NPB1-10)" or "Standards to Authorize Banks and Exclusive Purpose Controlling Companies to Make Share Investments in Subsidiaries and Offices in Foreign Countries (NPB1-11)", as applicable.

Sanctions
Art. 14.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Repeal
Art. 15.- These Standards repeal the "Standards to Determine the Companies that can Form part of Financial Conglomerates" (NPB4-33), approved by the Board of Directors of the Financial System Superintendence in Session No. CD-38/2001 of August 1, 2001, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Journal No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 16.- Unforeseen aspects in regulatory matters in these Standards will be resolved by the Central Bank through its Norms Committee.

Validity
Art. 17.- These Standards will enter into force as of August 30, two thousand twenty-four.

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