Technical Standards for the Publication of Risk Ratings of Banks, Investment Banks, and Savings and Credit Institutions

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TECHNICAL STANDARDS FOR THE PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT INSTITUTIONS

Approval: 09/23/2024 Validity: 10/09/2024

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

CONSIDERING:

I. That Article 235, first paragraph, of the Banks Law, and Article 64, first paragraph, of the Investment Banks Law establish that banks and investment banks, respectively, must be rated annually by a risk rating agency registered in the Public Stock Registry maintained by the Superintendency of the Financial System. The Superintendency may require another rating when it is presumed that the first has inadequately applied the rating methodology, has violated the respective Law in rating, or has manipulated the information. (1)

II. That Article 235, second paragraph, of the Banks Law establishes that, when it comes to branches of foreign banks, the rating of the bank will be accepted when it has been carried out by an internationally recognized risk rating agency.

III. That Article 235, third paragraph, of the Banks Law establishes that entities providing the rating service must update and make public the ratings in the manner and with the periodicity determined by the Superintendency, a power that, by virtue of the entry into force of the Law on Supervision and Regulation of the Financial System, was transferred to the Central Reserve Bank, through its Committee of Standards.

IV. That Article 64, second paragraph, of the Investment Banks Law establishes that entities providing the rating service must update and make public the ratings in the manner and with the periodicity determined by the technical standards issued for this effect by the Central Bank through its Committee of Standards. (1)

V. That Articles 155 and 161 of the Cooperative Banks and Savings and Credit Institutions Law establish that Savings and Credit Institutions shall be subject to the provisions of the Banks Law insofar as they are pertinent. (1)

VI. That Article 7, letter b), of the Law on Supervision and Regulation of the Financial System establishes that banks incorporated in El Salvador, their offices abroad and their subsidiaries; the branches and offices of foreign banks established in the country, are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendency of the Financial System. (1)

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TECHNICAL STANDARDS FOR THE PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT INSTITUTIONS

Approval: 09/23/2024 Validity: 10/09/2024

VII. That Article 7, letter f), of the Law on Supervision and Regulation of the Financial System establishes that risk rating agencies are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendency of the Financial System. (1)

VIII. That Article 7, letter g), of the Law on Supervision and Regulation of the Financial System establishes that savings and credit institutions regulated by the Cooperative Banks and Savings and Credit Institutions Law are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendency of the Financial System. (1)

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT INSTITUTIONS (1)

CHAPTER I OBJECT, SUBJECTS, AND TERMS

Object Art. 1.- These Standards aim to regulate the publications of the risk rating of the entities that must be carried out by the risk rating agencies contracted by them, as well as the publications made by the entities themselves.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are: a) Banks incorporated in the country; b) Branches of foreign banks established in the country; c) Savings and Credit Institutions; d) The Development Bank of the Republic of El Salvador, insofar as it does not contradict its creation law; e) The Agricultural Development Bank, insofar as it does not contradict its Creation Law; f) The Mortgage Bank of El Salvador, S.A.; (1) g) Investment Banks; and (1)

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TECHNICAL STANDARDS FOR THE PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT INSTITUTIONS

Approval: 09/23/2024 Validity: 10/09/2024

h) Risk Rating Agencies registered in the Public Registry of the Superintendency of the Financial System, which provide the risk rating service to the entities indicated in the preceding letters. (1)

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) Rating Agency(ies): Risk Rating Agency; c) Entity(ies): Subjects referred to in Article 2 of these Standards, in the letters included from a) to g); and (1) d) Superintendency: Superintendency of the Financial System.

CHAPTER II ON PUBLICATIONS

Publication by rating agencies and content Art. 4.- Rating Agencies must publish, no later than April 30, based on the financial statements of December 31, on their website, the ratings granted to the entities in their last evaluation.

Likewise, Rating Agencies, with respect to the content of the rating reports, as well as the updates of the ratings granted to the entities, must comply with the standards issued by the Central Bank through its Committee of Standards.

Furthermore, Rating Agencies must send the rating reports and their updates to the Superintendency in the manner and deadlines referenced in the Standards mentioned in the second paragraph of this article.

Publication by entities Art. 5.- Entities must publish the most recent rating on the same dates they publish their financial statements, including it in a note to the financial statements. Such note must be in accordance with the Manual (NCF-01) (NCF-12), issued by the Central Bank through its Committee of Standards. (1)

Publications made by international rating agencies Art. 6.- Branches of foreign banks, if they choose to use the rating granted by a foreign rating agency recognized internationally, must directly comply with the publication and information submission obligations established in these Standards, which they will carry out using the reports that the foreign rating agency provides to its parent company.

In the event that the nomenclature used abroad is different from that defined in national legislation, they will publish the rating as it was granted by the respective rating agency and its definition, in Spanish.

CHAPTER III OTHER PROVISIONS AND VALIDITY

Internationally recognized rating agencies Art. 7.- For the purposes indicated in Article 235, second paragraph, of the Banks Law, those recognized by the Securities and Exchange Commission of the United States of America and those that can demonstrate their quality as a rating agency before the Superintendency will be considered as internationally recognized Rating Agencies.

Other obligations of entities Art. 8.- Entities must ensure that the rating agencies they hire to provide them with the rating service comply with the publication requirements of the ratings granted to them, authorizing the disclosure of their ratings.

Requirement of other ratings Art. 9.- The Superintendency may require the entity to obtain another rating when it is presumed that the rating methodology has been inadequately applied, the current legislation has been violated in rating, or the information has been manipulated.

Sanctions Art. 10.- 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. 11.- These Standards repeal the Standards for the Publication of the Risk Rating of Banks NPB4-25), approved by the Board of Directors of the Superintendency of the Financial System in Session No. CD-50/2000 of September 27, 2000, whose Organic Law was repealed by Legislative Decree No. 592 which contains the Law on Supervision and Regulation of the Financial System, published in the Official Diary No. 23, Volume No. 390, of February 2, 2011.

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 4 of 5 CNBCR-09/2024 NRP-83

TECHNICAL STANDARDS FOR THE PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT INSTITUTIONS

Approval: 09/23/2024 Validity: 10/09/2024

Unforeseen Aspects Art. 12.- Matters not provided for in regulation in these Standards will be resolved by the Central Bank through its Committee of Standards.

Validity Art. 13.- These Standards will enter into force from October 9, 2024.

MODIFICATIONS: (1) Modifications in the name of the Standards, in the considerations I, IV, V, VI and VII, and incorporation of consideration VIII, and modifications in articles 2, 3 and 5, approved by the Central Bank through its Committee of Standards, in Session No. CN-08/2025, of September 30, 2025, with validity from October 15, 2025.