Norm Reforming Articles 15, 16, 17 and Annex 1 of the Standard on Financing Granted by General Warehouses and Assets Acquired in Recovery

Page 1 of 5 Resolution No. CD-SIBOIF-1088-2-DIC6-2018 Dated December 6, 2018 STANDARD REFORMING ARTICLES 15, 16, 17 AND ANNEX 1 OF THE STANDARD ON FINANCING GRANTED BY GENERAL WAREHOUSES AND ASSETS ACQUIRED IN RECOVERY

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

CONSIDERING

I That on May 11, 2011, the Standard on Financing Granted by General Warehouses and Assets Acquired in Recovery was approved, contained in Resolution No. CD-SIBOIF-676-2-MAY11-2011, published in La Gaceta, Official Journal, No. 131 of July 14, 2011.

II That it is necessary to adapt the provisions contained in the aforementioned standard, in accordance with the new Accounting Framework applicable to General Warehouses, which is based on a combination of International Financial Reporting Standards (IFRS) and prudential regulations issued by this Superintendence.

III That based on the authority conferred by articles 2 and 139 of Law 734, General Warehouse Law; and article 2, fourth paragraph, article 3, numeral 13), and article 10, numeral 2) of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; contained in Law No. 974, Law of the Nicaraguan Legal Digest on Banking and Finance Matters, published in La Gaceta, Official Journal No. 164, of August 27, 2018, and its reforms.

In exercise of its powers,

HAS ISSUED,

The following:

Resolution No. CD-SIBOIF-1088-2-DIC6-2018 STANDARD REFORMING ARTICLES 15, 16, 17 AND ANNEX 1 OF THE STANDARD ON FINANCING GRANTED BY GENERAL WAREHOUSES AND ASSETS ACQUIRED IN RECOVERY

FIRST: Articles 15, 16, and 17 of the Standard on Financing Granted by General Warehouses and Assets Acquired in Recovery, contained in Resolution No. CD-SIBOIF-676-2-MAY11-2011, dated May 11, 2011, published in La Gaceta, Official Journal, No. 131 of July 14, 2011, are hereby amended, which shall read as follows:

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"Art. 15 Evaluation Criteria.- The assigned merchandise shall be valued in accordance with the analysis and documentation criteria referred to in the regulations governing the operational and financial matters of general warehouses.

In the case of assigned real estate, the evaluation of said assets must be performed based on the estimate of the realization value in accordance with the regulations governing appraisers who provide services to institutions of the Financial System.

All real estate whose book value in national currency or foreign currency is greater than the equivalent in cordobas of twenty-five thousand United States dollars (US$25,000.00), at the official exchange rate, must have appraisals performed by independent appraisers registered with the General Warehouse, duly registered in the Register of Appraisers of the Superintendence of Banks, with the exception of assets located outside the country.

The evaluation of shares and rights in companies and, in general, financial instruments that have been received in payment in kind or assigned, shall be performed at fair value in accordance with the criteria defined in IFRS 13.

The general warehouse shall determine whether the assigned asset is recorded as non-current assets held for sale in accordance with the criteria of IFRS 5, or as assets received from recoveries, in case the criteria established in the aforementioned IFRS are not met.

Recognition and Measurement of Assigned Assets under IFRS 5 Non-Current Assets Held for Sale.

An entity shall classify an assigned asset as a non-current asset held for sale when it meets the criteria established in IFRS 5. The accounting procedure is as follows:

1. Classification to Non-Current Assets Held for Sale (IFRS 5) from the date of assignment of the asset.

The institution, for initial registration in accordance with IFRS 5, must take the lower of: a) The amount agreed in the transfer in payment, or assignment at auction in accordance with the General Warehouse Law or judicial auction, as applicable; this is considered as the cost of the asset, and its b) Fair value (determined in accordance with IFRS 13) less selling costs (in accordance with IFRS 5).

The financial institution must write off the outstanding balance of the credit against the provision and, in case there is a remaining provision balance, it must be reversed in the corresponding account of the statement of income, being controlled in the sub-account of Undistributable Current Year Income.

Subsequently, all provisions established in IFRS 5 apply.

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2. Reclassification of Assets Received in Credit Recovery to Non-Current Assets Held for Sale (IFRS 5).

This is the case when an assigned asset meets the IFRS 5 criteria after assignment and registration as Assets Received in Credit Recovery.

The reclassification may be made to the Non-Current Assets Held for Sale account and shall be performed at the lower of: a) The initial amount recognized in the Assets Received in Credit Recovery account, without considering provisions, and its b) Fair value (determined in accordance with IFRS 13) less selling costs (in accordance with IFRS 5).

For assets that are reclassified to IFRS 5 in the Opening Balance Sheet applying what is established in IFRS 1 First-time Adoption of International Financial Reporting Standards, the accumulated provision for these shall be reversed in the corresponding sub-account of Transition Adjustment.

The reclassification of Assets Received in Credit Recovery to IFRS 5 may only be performed in a period not exceeding 6 months, counted from the date of assignment.

In case there is an excess of provision resulting from the reclassification of the asset received in credit recovery to non-current assets held for sale, this must be reversed in the corresponding account of the statement of income, being controlled in the sub-account of Undistributable Current Year Income.

Subsequently, all provisions established in IFRS 5 apply.

3. Changes in the sales plan of the asset classified as Non-Current Assets Held for Sale (IFRS 5).

When there is a change in the sales plan, because the IFRS 5 criteria are no longer met, the asset will be reclassified to the Assets Received in Credit Recovery account, for the book amount recognized in the Non-Current Assets Held for Sale account, adjusted from the date of assignment, by the provision established in article 16 of this standard, for which it must consider the provision constituted as impairment, and in case there is a provision deficit, this shall be constituted against the corresponding expense account of the statement of income.

When the change in the sales plan corresponds to assets that were originally reclassified to IFRS 5 in the opening financial statements of January 1, 2018, the provision to be constituted from the date of assignment shall be debited from the Transition Adjustment account, provided that the specific asset has a positive balance in the aforementioned account for that concept. In case there is a provision deficit as required in article 16 of this standard, this shall be constituted and recognized as an expense in the corresponding account of the statement of income.

Subsequently, the remaining positive balance of the specific asset, registered in the Transition Adjustment account, may: i) be reversed against accumulated results until the asset is sold; ii)

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and while the asset is not sold, it will complement the provision requirement established in article 16 of this standard.

An asset registered as IFRS 5 and reclassified to the Assets Received in Credit Recovery account may not be reclassified again under the scope of IFRS 5.

4. Treatment of Undistributable Results.

The amounts registered in the sub-account of Undistributable Current Year Income and Undistributable Accumulated Results of Previous Years, will be distributable until the asset that generated them is sold or 100% provision is registered.

Art. 16 Constitution of Provisions.- In the case of an assignment of assets received in credit recovery, the warehouse must transfer the respective provisions of the credit to provisions for assigned assets received in credit recovery until the cancellation by the sale of the asset is performed.

In any case, the accounted provision cannot be less than the following percentages of the value of the asset registered in the books: a) In movable assets: 30% From its registration until 6 months after the assignment of the asset. 100% After 6 months from the assignment of the asset. b) In real estate: 30% After 6 months until 12 months from the assignment. 50% After 12 months and up to 18 months from the assignment. 75% After 18 months until 24 months from the assignment. 100% After 24 months from the assignment.

Art. 17 Reversal of Constituted Provisions.- The constituted provisions may be reversed once the sale of the corresponding asset is effected, considering previously against these, the possible losses determined by the effect of the decrease in the value of the asset at the time of sale.

If the asset in question is sold for a higher value, both the excess of the sale value and the constituted provisions must be registered as gains from the sale of various assets.

The provisions of the assets received in credit recovery, reclassified to non-current assets held for sale (IFRS 5), must be reversed, registering income from the decrease in provision of assets received in credit recovery."

SECOND: Annex 1 of the Standard on Financing Granted by General Warehouses and Assets Acquired in Recovery, referred to in the first section of this resolution, is hereby amended, which shall read as follows:

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"ANNEX 1 LEGAL AND ECONOMIC INFORMATION OF THE DEBTOR

In all cases of loans granted by the warehouse, there must be in the respective file the credit proposal elevated to the corresponding resolving instances, as well as the resolution exposing the conditions required by said instance.

A. Natural Persons:

1. Credit application.
2. General information (name, marital status, occupation, Identity Card, address, activity, telephone).
3. Activity.
4. Business registration and RUC No., when applicable.
5. Statement of Financial Position and Statement of Income when required by the warehouse.
6. Valuation made by the Warehouse of the goods or merchandise received as collateral when appropriate.
7. Document containing the approval of the credit by the corresponding resolving instance.

B. Legal Persons:

1. Credit application.
2. Deed of incorporation and bylaws of the Company.
3. Document accrediting legal representation.
4. Business registration and RUC No.
5. Statement of Financial Position and Statement of Income when required by the warehouse.
6. Valuation made by the Warehouse of the goods or merchandise received as collateral when appropriate, and
7. Document containing the approval of the credit by the corresponding resolving instance."

THIRD: The provisions established in this standard shall govern from January 1, 2019; nevertheless, for the purposes of implementation of IFRS 1 - First-time Adoption of International Financial Reporting Standards, General Warehouses shall apply these provisions to the first financial statements generated during the transition period, as referred to in the regulations governing the matter on the implementation of Accounting Frameworks.

FOURTH: This standard shall enter into force from its notification, without prejudice to its subsequent publication in La Gaceta, Official Journal. (F) S. Rosales C (F) V. Urcuyo (F) Fausto Reyes B. (F) Illegible (Silvio Moisés Casco Marenco) (F) Illegible (Rafael Ángel Avellán Rivas) Secretary.

RAFAEL ÁNGEL AVELLÁN RIVAS Secretary of the Board of Directors SIBOIF