Technical Standards on the Minimum Content of the Securitization Contract

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

CONSIDERING: I. That Article 44 of the Asset Securitization Law establishes that the Securitization Fund shall be constituted by operation of law at the moment of granting the Securitization Contract, as an estate independent of the estate of the Originator. II. That Article 47 of the Asset Securitization Law establishes that the Securitization Contract shall be granted in a public deed by the Representative of the Bondholders and the Originator, shall comprise the act of constitution of the Fund and the act of issuance of the securities, and shall contain at least the clauses established in said article and Article 71 of the same law. III. That Article 72 of the Asset Securitization Law establishes that the Securitization Contract shall be the public instrument that must be recorded with the Superintendence of the Financial System, whereby said instrument shall be the one that incorporates the rights and duties of issuers and investors. IV. That Article 3, literal h) of the Law on Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendence of the Financial System to authorize the registrations, registry entries, modifications, and cancellations of persons, institutions, and operations subject to said requirement, in accordance with the laws on the matter. V. That Article 5, literal a) of the Law on Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendence of the Financial System to authorize, suspend, or cancel the public offering of securities and the functioning of persons or operations carried out in the stock market, in accordance with what is established in the applicable provisions. VI. That Article 7, literal q) and u) of the Law on Supervision and Regulation of the Financial System establishes that securitizers and other operations specified by the laws are subject to the provisions of said Law and therefore to the supervision of the Superintendence of the Financial System.

THEREFORE,

by 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:

TECHNICAL STANDARDS ON THE MINIMUM CONTENT OF THE SECURITIZATION CONTRACT

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CHAPTER I OBJECT, SUBJECTS, AND TERMS

Object Art. 1.- These standards aim to regulate the minimum content of the Securitization Contract entered into between the Originator and the Representative of the Bondholders.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are the Originators.

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) Securitization Fund: Independent estate, different from that of the Originator and the Originator, formed by a set of assets and liabilities that result or are integrated as a consequence of the development of the respective securitization process. The assets of the Fund shall have the main purpose of generating payments for the securities issued against it; c) Law: Asset Securitization Law; d) Representative of the Bondholders: Legal entity responsible for representing the owners of the securities of each Fund according to what is established in the Law; e) Superintendence: Superintendence of the Financial System; and f) Originator: Legal entity that administers the Securitization Funds.

CHAPTER II ON THE MINIMUM CONTENT OF THE ASSET SECURITIZATION CONTRACT

Securitization Contract Art. 4.- The Securitization Contract shall be granted in a public deed before a Salvadoran notary, by the Representative of the Bondholders and the Originator. Said contract shall comprise the act of constitution of the Fund and the act of issuance of securities, and must in all cases comply with the formalities indicated by the applicable legislation.

Minimum Information of the Originator Art. 5.- The information regarding the Originator that the Securitization Contract must contain at a minimum is the following: a) General details of the originator society; b) Tax Identification Number; and c) Number of the registry entry in the Public Stock Registry.

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On the Constitution of the Fund Art. 6.- The clauses that the act of constitution of the Fund must contain at a minimum are the following: a) Followed by a name or denomination that individualizes it from any other Fund authorized by the Superintendence; b) The individualization or determination of the assets or rights that constitute or will constitute the Fund. If they cannot be individualized in the contract, the corresponding complementary deeds must be listed, with indication of their main characteristics and conditions and at least the following background: i. Nature of the assets to be securitized and general description thereof; ii. Originators; iii. Number of assets to be securitized; iv. Term in which they will be acquired; v. Acquisition value; vi. Range of value of the assets to be acquired, where applicable; and vii. In the case of securities of credit content or credit portfolios, each one must be individualized, with indication of all their specific and general characteristics or conditions, in which case the corresponding complementary deeds shall be granted. If, on the date of the celebration of the Securitization Contract, the contract for the transfer of assets between the originator and the Originator acting as administrator of the Fund has not yet been celebrated, the obligation of the former to respond for the legitimacy and existence of the rights over the assets to be securitized must be listed. The individualization or determination of each of the assets composing the Fund may be recorded in an annex that forms an integral part of the deed, which must be signed at least by the authorizing notary and the contracting parties; c) List of the documents in which the services agreed upon between the Originator and the Originator are recorded, and their responsibilities, if any; d) Method of administration of the securitized assets; e) Term of the Contract; f) Administration criteria, both for the financial flows generated by the Fund and for the money flows resulting before the Representative of the Bondholders certifies the compliance of the Originator in fully integrating the Fund. In the latter case, the obligation of the Representative of the Bondholders to keep the resources received in bank deposits or in investments in liquid, fixed-income securities with a low risk level must be recorded, in accordance with what is established in the Technical Standards for the Management of Resources of a Securitization Fund by the Representative of the Bondholders, approved by the Central Bank through its Committee of Norms; g) The rights and attributes of the Originator; h) Maximum commissions and emoluments for the agreed services;

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i) Causes of termination of the Securitization Contract and their effects on the Fund, considering its transfer to another Originator, in accordance with what is established in Article 38 of the Law and the respective agreement taken in the Extraordinary General Meeting of Bondholders; j) Mention of the initial auditors of the Fund, External and Fiscal, if any, appointed by the Originator and the conditions of their hiring; k) Regime for the withdrawal of extraordinary assets from the Fund, which shall be carried out in accordance with what is established in Articles 23 and 46 of the Law; l) The manner of disposing of remaining assets of the Fund after obligations to the Bondholders and other third parties have been fulfilled. In all cases, what Article 50 of the Law establishes regarding this matter must be considered; m) Clauses regarding the substitution of assets of the Securitization Fund. At least the characteristics of the assets that may substitute the assets already incorporated into the Fund must be included, including their credit quality, amount, term, and maximum percentages. In the Securitization Contract, it must be recorded that the substitution of assets shall only proceed with the prior approval of the Representative of the Bondholders. For these purposes, the term that said representative will have to give approval for the substitution of assets must be recorded in the Securitization Contract, understanding that if they do not pronounce themselves within said term, it will be understood that they agree with the respective substitution. Once the substitution is carried out, the aforementioned Representative of the Bondholders will be obliged to notify this circumstance to the Superintendence within five days following it; n) Norms related to additional contributions to the Securitization Fund; o) Norms on the administration of excesses; p) The determination of the securities or investments in which the financial flows coming from the Securitization Fund may be kept by the Originator, taking into consideration what is provided in Article 63 of the Law; q) Additionally, provisions may be incorporated that aim to regulate the liquidation process of the Fund and the manner of administering this process, as well as the obligations of the liquidator. In the case where provisions related to the administration process of the Fund are incorporated, these must necessarily comprise the manner of alienation of the assets of the Fund and the continuation of the administration of the Fund until the extinction of the assets that compose it. r) Establish the payment hierarchy of the Fund in Liquidation that must be made during said process, taking into consideration what is provided in Article 70 of the Law; s) Criteria for the constitution of reserves charged to the Fund, if applicable; t) In case the Fund is constituted by a credit portfolio, the treatment to be given to partial prepayments of the credits, if any, must be specified; u) Debt policy that the Fund will apply, which must include the definition of aspects such as: levels, causes, and the administration of debt; and

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v) Other rights or responsibilities of the Originator not contemplated in the Law. Likewise, in the case of a Real Estate Securitization Fund, the Securitization Contract must contain the clauses referred to in the Technical Standards for Real Estate Securitization Funds (NDMC-20), approved by the Central Bank through its Committee of Norms.

Administration and Custody Art. 7.- Regarding the administration and custody of the securitized assets, the following must be listed: a) Identification of the entity designated as administrator of the assets that compose the Securitization Fund and the maximum remuneration to be paid for this concept; and b) Identification of the entity designated for the custody of the assets that compose the Securitization Fund and the maximum remuneration to be paid for this concept.

Representative of the Bondholders Art. 8.- Regarding the Representative of the Bondholders, the following information must be detailed: a) Identification of the Representative of the Bondholders, at least their corporate name, the abbreviation of said name, their nationality, domicile, number of their registration in the Commerce Registry, and Tax Identification Number; b) List the certification of the point in the minutes by virtue of which the Originator agreed on the designation of the Representative of the Bondholders; c) In the case where the Representative of the Bondholders is not a Bank or a Brokerage House, the number of the resolution by virtue of which the Superintendence agreed to authorize said representative to act as such must be recorded; d) Procedures for election, resignation, replacement, and removal; e) Grounds for cessation in office; f) The general powers granted to them, especially the oversight powers they will have over the Originator; g) Duties and responsibilities, especially the information obligations they will have with the bondholders of the securitized securities, in concordance with what is provided in Article 80 of the Law; and h) Indication of the links or roles of the Representative of the Bondholders in other securitized issuances, if applicable.

Assemblies of Bondholders Art. 9.- The norms governing the functioning of the Bondholders' Assemblies must be stipulated, in addition to what is specified in the Law, which may be subject to modifications.

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On the Issuance of Securities Art. 10.- The Securitization Contract, regarding the act of issuance of securities, must contain at a minimum the following provisions: a) Description of the securities to be issued, their characteristics, and the rights they incorporate; b) Maximum amount of the issuance, expressly indicating the type of currency in which the issuance will be made; c) The values corresponding to each series or tranche must recognize equal rights to the Bondholders, differences in the rights assigned to the different tranches may be established; d) Negotiability (form or transferability of the securities); e) Number of securities comprising each tranche and maximum amount of each tranche of the issuance; f) Payment hierarchy of the securities, by their tranche, and payments to other creditors of the Fund; g) Minimum and maximum nominal value of the securities of the tranches; h) Term for the placement of the issuance; i) Form and place of payment; j) Financial services of the issuance, detailing the name and domicile of the entities that, once the placement of the securities is made, will attend the financial service derived from the issuance (payment of interest and settlement of the securities at maturity, as well as any other that might arise during their validity); k) Indication of whether there will be or not additional guarantees or coverage mechanisms to the assets backing the securitized securities. In the case that there are credit enhancement mechanisms, the description and indication of their legal nature, estimated amount, and basis of the estimation must be listed; their specific purpose must be explicit, indication of the procedure and term for their constitution, procedures for substitution, modification, or renewal, indication of whether there are insurance contracts on the assets of the Fund or on the guarantees. In the case of guarantees granted by third parties, the place where the investor can obtain information must be indicated. The record of the constitution of the guarantees must be presented as an annex to the Securitization Contract. For the purposes of this literal, the existence of the guarantees must be recorded by attaching to the Securitization Contract the instrument by virtue of which said guarantee is covered, where applicable; l) Identification of the Risk Classifier that will perform the first classification of the issuance, and the general conditions of its hiring; m) Initial Risk Classification of the issuance; n) Rights and attributes of the General Meeting of Bondholders over the Originator and the issuance, in addition to those established in the Law; o) Procedure to be followed in case of early redemption of all or part of the placed securities; p) In case the issuance consists of securities of credit content, the following additional information must be provided:

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i. Maturity term thereof;
ii. Method of calculation of the interest rate that will generate the value, as well as its calculation base, the determination of default interest, the periodicity of payment, the estimated start date of payments, and the mechanism or procedure that the Originator will use to make said payment. If the payment is made via coupons, indicate periods, place, entities, and procedure for the payment of coupons, explicitly stating if there is an exception period (holidays and weekends, among others). If the interest is not fixed, the variable or indicator with which it relates and the method used must be clearly described. For these purposes, the reference from which it originates, the scope, term over which it governs or has validity, and the place, form, and moment in which it is announced and made known to the public must be indicated;
iii. Adjustability of the securities;
iv. Estimated date from which the value begins to generate interest and adjustments;
v. Method of amortization of the capital to be paid. It must be indicated, for each series, the maximum and minimum amount of capital amortization to be paid in each coupon, the periodicity of payment, the estimated start date of payments, and the mechanism or procedure that the originator will use to make said payment. If the payment is made via coupons, indicate dates, place, entities, and procedure for the payment of coupons, explicitly stating if there is an exception period (holidays, weekends, among others);
vi. If it is a fixed interest rate issuance, a development table must be included, which must contain at least the information regarding the respective securities as follows:
    1. Number of interest installments;
    2. Number of amortization installments;
    3. Payment date for interest and amortizations;
    4. Amount of interest to be paid in each installment;
    5. Amount of capital amortization to be paid in each installment;
    6. Total installment to be paid in interest and amortizations; and
    7. The outstanding capital balance after paying the total installment, respectively. This information will be presented in the form of an annex to the Securitization Contract; and
vii. Date or period of extraordinary amortization. It must be indicated, for each series, the date from which extraordinary amortizations or early redemptions by the issuer may be made, if applicable.

q) In the case that the issuance consists of titles representing participation in the equity of the Fund, the form and modalities of the distribution of dividends must be indicated.

Costs and Remunerations Art. 11.- The costs and expenses charged to the Fund must be determined, as appropriate, in the following manner:

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a) Remuneration of the Originator; b) Remuneration of specific services contracted for the administration of the securitized assets; c) Remuneration of the Representative of the Bondholders; d) Maximum remuneration for the custody of the assets; e) Remuneration for the risk classification of the securitized securities issuance; f) Emoluments of the external and fiscal auditors of the Fund; g) Detail of the expenses associated with the issuance; h) Remuneration of expert appraisers in case of Funds integrated by real estate assets; i) Remuneration of specialized agents in the valuation of securities; and j) Other necessary expenses in the securitization process. In case of modifications to the amounts of costs and expenses charged to the Fund, the Originator must have the approval of the Representative of the Bondholders prior to said modifications. For such purposes, the Representative of the Bondholders will have a term of ten business days; if, after the aforementioned term has elapsed, they do not pronounce themselves, it will be understood that they agree with the modifications. Likewise, these modifications must be informed to the Bondholders in the monthly report, and the Representative of the Bondholders must inform about said changes to the Assembly of Bondholders that takes place immediately thereafter. The foregoing circumstances must be recorded in the Securitization Contract.

Other Mandatory Clauses Art. 12.- The Securitization Contract must additionally include, when applicable, the following information: a) Clearly define the method of calculation, concept, and nature of all those indicators and technical terms used in the Securitization Contract; b) It must be indicated that the Securitization Contract will remain in force as long as the liabilities of the Fund have not been extinguished or when the Representatives of the Bondholders so stipulate according to what is established in the Law; c) Means of dispute resolution to which the differences that arise in connection with the issuance, validity, or extinction of the Securitization Contract may be submitted; and d) Include any other stipulation that the parties deem convenient for the better regulation of the rights and protection of the Secured Bondholders, provided that it does not violate the legal framework and the issued regulations that are applicable. Additionally, the domicile to which the Originator and the Representative of the Bondholders submit themselves must be included.