Resolution SBS No. 7033-2012: New Regulation on Classification and Valuation of Investments of Financial System Companies

Lima, September 19, 2012
S.B.S. Resolution
No. 7033 -2012
The Superintendent of Banking, Insurance and Private Pension Fund Administrators:

CONSIDERING:

That numeral 13 of article 349 of the General Law of the Financial System and of the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702 and its modifying norms, hereinafter General Law, states that the Superintendence has the authority to issue general norms to specify the preparation, presentation, and publicity of financial statements, and any other complementary information, ensuring that the real economic-financial situation of the companies under its supervision is reflected;

That, numeral 1 of article 354 of the General Law provides that the Superintendence may require supervised entities to constitute provisions and reserves for assets and contingents that entail credit and market risk, in accordance with the general norms issued on the matter;

That, numeral 2 of article 354 of the General Law provides that the Superintendence has the power to establish the methodology that allows adjusting to market value the investments made by companies;

That, by means of SBS Resolution No. 10639-2008 of October 31, 2008 and its modifying norms, the Regulation on Classification and Valuation of Investments of Financial System Companies was approved;

That, by means of SBS Resolution No. 1737-2006 and its modifying norms, the Regulation for the Negotiation and Accounting of Financial Derivative Products in Financial System Companies was approved;

That, the Superintendence has considered it convenient to harmonize its accounting regulations with International Financial Reporting Standards (IFRS), which determines the need to adapt the accounting provisions applicable to investments and financial derivative products;

That, for the purpose of collecting opinions from the general public regarding the proposed modifications to the financial system regulations, the pre-publication of the draft resolution was arranged on the Superintendence's electronic portal, under the authority of Decree Supreme No. 001-2009-JUS;

That, in the case of the Regulation on Classification and Valuation of Investments of Financial System Companies, it has been considered convenient to issue a new Regulation consolidating the modifying norms;

Being in accordance with the opinion of the Adjunct Superintendencies of Banking and Microfinance, Risks, Economic Studies and Legal Advice; and,

In exercise of the powers conferred by numerals 7, 9 and 13 of article 349 of the General Law;

RESOLVES:

Article First.- Approve the new Regulation on Classification and Valuation of Investments of Financial System Companies, hereinafter Regulation, which forms part of this Resolution, under the following terms:

“REGULATION ON CLASSIFICATION AND VALUATION OF INVESTMENTS OF FINANCIAL SYSTEM COMPANIES

CHAPTER I
GENERAL ASPECTS

Article 1.- Scope
This norm applies to the companies included in letters A and B of article 16 of the General Law of the Financial System and of the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702, and its modifying norms, to the Development Financial Corporation (COFIDE), to the National Bank, to the Agricultural Bank, to the MIVIVIENDA S.A. Fund and to the Guarantee Fund for Small Industry Loans (FOGAPI), hereinafter companies.

Article 2.- Definitions
For the purposes of this Regulation, the following definitions shall be considered:

a) Associate: An entity over which the investor has significant influence, that is, the power to intervene in the financial and operational policy decisions of the investee without having control over it, in accordance with the provisions of IAS 28 “Investments in Associates”.

b) Commodities: Primary or basic goods consisting of physical products, which can be exchanged in a secondary market, including precious metals but excluding gold, which is treated as a currency.

c) Amortized cost: The amount at which a financial asset or a financial liability was initially measured, less any principal repayments, plus or minus, as appropriate, the cumulative amortization of the difference between that initial amount and the maturity amount using the effective interest method, and less any reduction for impairment recognized directly as a decrease in the amount of the asset or through a valuation allowance account.

d) Transaction costs: Incremental costs directly attributable to the acquisition, issue, sale or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued, or disposed of the financial instrument. They include fees and commissions paid to agents (including employees acting as sales agents), advisors, brokers and intermediaries, fees established by regulatory agencies and stock exchanges, as well as taxes and other duties. Transaction costs do not include premiums or discounts on debt, financial costs, internal administration costs or maintenance costs.

e) Custody: Service provided by specialized institutions that includes physical safekeeping, correct allocation of investment instruments, verification of settlements and compensations, “settlement”, collection of benefits, valuation of the referenced instruments in custody, payment of taxes and others related to these services.

f) Delivery versus payment: Modality by which the “settlement” of negotiated investment instruments is carried out through their delivery in exchange for the receipt of cash according to the terms agreed in the transaction.

g) Days: Calendar days.

h) Local risk rating agencies: Companies authorized to classify investment instruments as provided by the Securities Market Law.

i) Freely accessible price sources: Those provided through Bloomberg, Reuters, Datatec or similar information systems that provide services in the country, as well as from stock exchanges supervised and regulated by the corresponding authorities.

j) Economic group: Set of national or foreign legal entities, composed of at least two legal entities, when any of them exercises control over the others, or when control over the legal entities corresponds to one or more natural persons acting as a decision-making unit, in accordance with the Special Norms on Linkage and Economic Group approved by SBS Resolution No. 445-2000.

k) Recoverable amount: The higher of fair value less costs to sell and value in use.

l) Intermediaries: Institutions duly authorized by the regulatory authorities of the securities and/or financial markets to provide the service of intermediation of investment instruments on their own account or on behalf of third parties, by virtue of compliance with the respective registration requirements in the corresponding records and the respective minimum capital requirements.

m) Custody institutions: Institutions duly authorized by the regulatory authorities of the financial and/or securities markets to provide the custody service.

n) Depositary institutions: Institutions authorized by the regulatory authorities of the securities and/or financial markets to provide centralized deposit services for investment instruments. Such services include the registration of investment instruments issued by book entry, the physical safekeeping activities of investment instruments, the clearing and settlement of operations, and the collection and payment of benefits, on a scale that involves a significant portion of the assets in circulation in the securities markets.

o) Debt representative instrument: A value that represents an obligation on the part of the issuer, has a nominal value and may be amortizable. The yield of these values is associated with an interest rate, another value, basket of values or index of debt representative values.

p) Equity representative instrument: Those instruments representing rights to equity participation, including instruments where the magnitude of their expected partial or total return is not certain, fixed, or determinable at the time of their acquisition.

q) Investment instrument: Debt representative instruments, equity representative instruments and other instruments determined by the Superintendence.

r) General Law: General Law of the Financial System and of the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702 and its modifications.

s) Securities Market Law: Unified Text of the Securities Market Law, approved by Decree Supreme No. 093-2002-EF and its modifications.

t) Accounting Manual: Accounting Manual for Financial System Companies approved by SBS Resolution No. 895-98 of September 1, 1998 and its modifying norms.

u) Hedging mechanisms: Means intended to guarantee the fulfillment of the obligations that the trust estate incurs with the holders of the instruments issued with its backing, among which are the subordination of the issuance, overcollateralization, excess cash flows, portfolio substitution, guarantees, insurance policies, credit opening contracts and guarantee trusts.

v) Active market: When quotation prices are easily and regularly available through a stock exchange, financial intermediaries, a sectoral institution, a pricing service or a regulatory body, and those prices reflect current market transactions that occur regularly, between parties acting in a situation of mutual independence.

w) Effective interest method: A method of calculating the amortized cost of a financial asset or liability and of allocating financial income or expense over the relevant period.

x) Equity Method: An accounting method according to which the investment is initially recorded at cost, and is subsequently adjusted based on the changes experienced, after acquisition, by the portion of the net assets of the investee entity that corresponds to the investor. The investor's result for the period includes the portion corresponding to the investee's results.

y) IAS: International Accounting Standard.

z) IFRS: International Financial Reporting Standard.

aa) Market Risk Regulation: Regulation for the Supervision of Market Risk, approved by SBS Resolution No. 509-98 of May 22, 1998 and modifications.

bb) Settlement: Clearing and settlement resulting from the negotiation of an investment instrument that is carried out within generally pre-established timeframes. The successful conclusion of the clearing and settlement determines the transfer of ownership of such instruments between the participants in the negotiation.

cc) Superintendence: Superintendence of Banking, Insurance and Private Pension Fund Administrators.

dd) Effective interest rate: The discount rate that exactly equates the estimated cash flows to be received or paid over the expected life of the financial instrument with the net book amount of the financial asset or financial liability. For this calculation, the entity will estimate the cash flows taking into account all contractual conditions of the financial instrument, not considering future credit losses.

The calculation of the effective interest rate will include all commissions and interest paid or received by the parties to the contract, which make up the effective interest rate, as well as transaction costs and any other premium or discount.

ee) Value in use: The present value of estimated future cash flows expected to be obtained from an asset or cash-generating unit.

ff) Fair value: The amount for which an investment instrument could be exchanged between a willing buyer and a willing seller, both knowledgeable and acting independently.

Article 3.- Information on investments
Companies must keep the following information regarding their investments available to the Superintendence:

a) Updated policies and procedures manuals; b) Models, assumptions, formulas and others used for the determination of fair value; c) Operational register of the market valuation of investments; d) Custody contracts for investment instruments, as well as the reports and information that custody companies send them; e) Account statements and contracts related to their investments; and, f) Other information that the Superintendence considers necessary.

CHAPTER II
CLASSIFICATION

Article 4.- Classification
The investments made by companies in accordance with the guidelines established in the policies and procedures manuals must be classified into the following categories:

1. Investments at fair value through profit or loss;
2. Available-for-sale investments;
3. Held-to-maturity investments; and,
4. Investments in subsidiaries, associates and joint ventures.

Article 5.- Investments at fair value through profit or loss
The category investments at fair value through profit or loss comprises investment instruments that meet any of the following conditions:

a) It is a trading instrument that:
i. Is acquired principally with the objective of selling it in the near future; or,
ii. Is part of a portfolio of identified financial instruments that are managed jointly, and for which there is evidence of a recent pattern of short-term profit taking.

b) From the moment of its initial accounting recognition, it has been designated by the company to be accounted for at fair value through profit or loss. Such designation can only be made if this allows obtaining more relevant information due to:
i. Eliminating, or significantly reducing, inconsistencies or asymmetries in recognition or valuation (also known as accounting asymmetries) that would arise from the valuation of assets or liabilities or from the recognition of their gains or losses, under different criteria.
ii. A group of financial assets, or of financial assets and liabilities, is managed and its performance is evaluated based on its fair value, in accordance with documented risk or investment management.

The following cannot be considered in this category:

a) Subject to article 15, investment instruments delivered as collateral 1; b) Investment instruments used as hedging mechanisms or those whose availability is restricted; c) Investment instruments issued by entities of the company's economic group; d) Equity representative instruments that do not have a quoted market price in an active market and whose fair value cannot be estimated reliably; and, e) Other investment instruments that the Superintendence determines by means of a norm of general application.

Article 6.- Available-for-sale investments
The category available-for-sale investments will include all investment instruments that are not classified as investments at fair value through profit or loss, held-to-maturity investments or investments in subsidiaries, associates and joint ventures. Likewise, investment instruments that are expressly indicated by norm will be included.

Article 7.- Held-to-maturity investments
Held-to-maturity investments comprise debt instruments whose collections are of fixed or determinable amount and whose maturities are fixed, and which also meet the following requirements:

a) They have been acquired or reclassified with the intention of holding them until their maturity date. Such intention is considered to exist only if the company's investment policy provides for the holding of these instruments under conditions that prevent their sale, transfer or reclassification, except in the cases described in article 16.

b) Companies must have the financial capacity to hold investment instruments until maturity.

c) They are instruments other than: i) those that, at initial recognition, the company has designated to be accounted for at fair value through profit or loss and ii) those that the company has designated as available-for-sale assets.

d) They must have risk classifications, according to the following requirements: 2 a. Be classified by at least two local or foreign risk rating agencies. Instruments issued by Central Banks of countries whose sovereign debt receives at least the classification corresponding to the sovereign debt of Peru are excluded from this requirement. b. For instruments classified by local rating agencies, according to the equivalences established in the Regulation for the Effective Capital Requirement for Credit Risk, approved by SBS Resolution No. 14354-2009 and modifying norms, the most conservative of the classifications is not lower than the BBB category.
c. For instruments classified by foreign rating agencies, according to the equivalences established in the Regulation for the Effective Capital Requirement for Credit Risk, approved by SBS Resolution No. 14354-2009 and modifying norms, the most conservative of the classifications is not lower than the BBB- category, except for sovereign debt of countries in the American continent, in which case it must be at least the lower of BBB- and the one corresponding to the classification received by Peru's sovereign debt.

e) Others that the Superintendence may establish in due course via a norm of general application.

Companies, to classify their investments in this category, must evaluate whether they have the financial capacity to hold investment instruments until maturity whenever they decide to classify an instrument and at the close of each annual fiscal year.

The following cannot be classified in this category:

i) Investment instruments that the company plans to hold for an indefinite period; ii) Investment instruments issued by entities of the company's economic group; iii) Instruments that have an issuer's redemption option, unless the conditions of the instrument determine that the exercise of the option allows the company to substantially recover the amortized cost of the referenced instruments, understood as the recovery of at least 90% of the amortized cost, and provided that the company has the intention and capacity to hold it until redemption or maturity; iv) Those that have the redemption option on the part of the company; v) Perpetual debt instruments that provide for interest payments for an indefinite time; and, vi) Others that the Superintendence communicates by means of a norm of general application.

Article 8.- Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures comprise equity representative instruments acquired by the company for the purpose of:

i. Participating in equity; and,
ii. Having control in accordance with the Special Norms on Linkage and Economic Group, joint control as stated in IAS 31 “Interests in Joint Ventures” and/or possessing significant influence in other entities taking into account what is stated in IAS 28.

For an investment to qualify as an investment in a joint venture, it must be evaluated whether the definition established in IAS 31 is satisfied, which states that a joint venture is a contractual agreement whereby two or more participants undertake an economic activity that is subject to joint control. Likewise, joint control is the contractual agreement to share control over an economic activity, which occurs only when strategic decisions, both financial and operational, of the activity require the unanimous consent of the parties sharing the control.

CHAPTER III
INITIAL RECOGNITION, SUBSEQUENT MEASUREMENT AND VALUATION

Article 9.- Initial accounting recognition
Transactions of investment instruments, classified in any of the categories described in article 4, must be accounted for using the “trade date” methodology referred to in IAS 39 “Financial Instruments: Recognition and Measurement”, that is, the date on which the reciprocal obligations that must

1 Literal modified by SBS Resolution No. 5790-2014, of 01-09-2014.
2 Literal substituted by SBS Resolution No. 2610-2018 of 04/07/21018.

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In the initial accounting record of investments, they shall be recorded at fair value, which corresponds to the transaction price, unless proven otherwise. If at the time of acquisition the investment instrument incorporates accrued interest pending payment by the issuer, a premium, or a discount, these must be incorporated in the initial recognition of the investment. Likewise, when dividends originate from net profits obtained before the acquisition of the instruments, they will be deducted from the cost thereof.

Investments at fair value with changes in profit or loss The initial accounting record of investments at fair value with changes in profit or loss shall be effected at fair value without considering transaction costs, recording said costs as expenses.

Available-for-sale investments and held-to-maturity investments The initial accounting record of available-for-sale investments and held-to-maturity investments shall be effected at fair value including transaction costs that are directly attributable to the acquisition of said investments.

Investments in subsidiaries, associates, and participations in joint ventures The initial accounting record of investments in subsidiaries, associates, and participations in joint ventures shall be effected at fair value.
In the initial accounting record of investments in subsidiaries, associates, and participations in joint ventures, the difference between the cost of the investment and the portion corresponding to the investor in the net fair value of identifiable assets and liabilities of the investee, shall be accounted for in accordance with the provisions established in the Accounting Manual.

Article 10th.- Subsequent measurement of investments
After the initial record, companies must account for their investments taking into consideration the category in which the investment instruments are classified.
For purposes of determining fair value, the guidelines established in Article 11th of this regulation must be followed.

1. Investments at fair value with changes in profit or loss
   a) Valuation at fair value
   The valuation of investments at fair value with changes in profit or loss shall be effected at fair value.
   In the case of debt-representing instruments, prior to valuation at fair value, companies must update the amortized cost accounting applying the effective interest rate methodology, and from the obtained amortized cost, gains and losses due to the variation in fair value must be recognized. b) Gains and losses

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When the fair value exceeds the book value, a gain due to value fluctuation shall be recognized. When the fair value is lower than the book value, a loss due to value fluctuation shall be recognized. In both cases, such fluctuation affects the results of the period.

2. Available-for-sale investments
   a) Valuation at fair value (or at cost) 3
   The valuation of available-for-sale investments shall be effected at fair value, according to the guidelines established in Article 11. Capital-representing instruments that do not have quoted prices in active markets and whose fair value cannot be estimated reliably must be measured at cost. In the case of debt-representing instruments, prior to valuation at fair value, companies must update the amortized cost accounting applying the effective interest rate methodology, and from the obtained amortized cost, gains and losses due to the variation to fair value must be recognized. b) Gains and losses The gain or loss originating from the fluctuation of the fair value of the investment instrument classified in this category, shall be presented in Other Comprehensive Income until the instrument is sold or realized, at which moment the unrealized gain or loss shall be reclassified from equity to the result of the period. c) Impairment losses 4 When one or more of the investment instruments classified as available-for-sale investments have suffered an impairment of value, according to what is provided in Article 12, the loss must be recognized in the result of the period. The amount of the impairment loss of debt-representing instruments shall be calculated as the difference between its amortized cost and its fair value determined according to Article 11 of the Regulation, minus any impairment loss previously recognized in the result of the period or previous periods. Regarding capital-representing instruments, the amount of the impairment loss shall be calculated as the difference between its acquisition cost and its fair value determined according to Article 11 of the Regulation, minus any impairment loss previously recognized in the result of the period or previous periods. In capital-representing instruments not traded in an active market that are measured at cost, the amount of the impairment loss shall be calculated as the difference between its acquisition cost and the present value of expected future cash flows, discounted at the market yield rate for other similar securities.

3 Literal substituted by SBS Resolution No. 2610-2018 of 04/07/2018.
4 Literal substituted by SBS Resolution No. 2610-2018 of 04/07/2018.

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The methodology and assumptions used to estimate cash flows must be reviewed periodically by the company itself and respective control bodies.
In the estimation of impairment of capital-representing instruments, it must be taken into consideration that the book value must not exceed the proportional participation in the book equity of the investee.
The amount of the loss that had previously been recognized in Other Comprehensive Income must be reclassified to the result of the period. d) Reversal of impairment losses 5 Impairment losses recognized in the result of the period or previous periods that correspond to the investment in debt-representing instruments shall be reversed through the result of the period, provided that the increase in the fair value of said instrument can be associated objectively and demonstrably to a favorable event occurring after the loss. Companies must document all objective evidence of the subsequent favorable event that justifies the increase in the value of the instrument, which must be available to this Superintendency. Impairment losses recognized in the result of the period or previous periods that correspond to the investment in capital-representing instruments shall not be reversed through the result of the period, being realized through Other Comprehensive Income. Regarding capital instruments measured at cost, impairment losses cannot be reversed.

5 Literal substituted by SBS Resolution No. 2610-2018 of 04/07/2018.

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3. Held-to-maturity investments.
a) Valuation at amortized cost
The company shall value its portfolio of held-to-maturity investments at amortized cost using the effective interest rate method.
Interest shall be recognized using the effective interest rate methodology, which incorporates both the interest to be collected and the amortization of the premium or discount existing in its award.
The result of the period shall not be affected by recognitions of gains or losses due to the increase or decrease in the fair value of instruments classified within this category.
Without prejudice to the provision in the preceding paragraph, when the investment instrument has been derecognized or impaired, the corresponding gains or losses shall be recognized in the result of the period. b) Impairment losses 6

6 Literal substituted by SBS Resolution No. 2610-2018 of 04/07/2018.

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When one or more of the investment instruments classified as held-to-maturity investments have suffered an impairment of value, according to what is provided in Article 12, the loss must be recognized in the result of the period.
The amount of the impairment loss of value shall be calculated as the difference between its book value (amortized cost) at the moment the impairment is confirmed and the present value of future cash flows expected to be recovered given the risk conditions that have been identified, discounted at the original effective interest rate (Purchase IRR) if it is an investment instrument with a fixed rate, or the current effective interest rate for the period (the rate at the date to which the financial statements refer), determined according to the contract, if it is an investment instrument with a variable rate. The book amount of the instrument shall be reduced and the amount of the loss shall be recognized in the result of the period. The methodology and assumptions used to estimate cash flows must be reviewed periodically by the company itself and respective control bodies. With respect to the above, the company shall not recognize an amount for impairment of value less than the difference between the amortized cost and the fair value at the evaluation date. c) Reversal of impairment losses After detecting the impairment loss and registering it according to the indication in the previous literal, said loss shall be subsequently adjusted according to the evaluations that are made and shall remain until favorable events are proven. In this sense, if the amount of the impairment loss of the investment instrument decreases and the decrease is objectively related to a subsequent event to the recognition of the impairment, such as an improvement in the risk classification of the instrument or the issuer, the registered impairment loss shall be reversed. Nevertheless, the reversal shall not give rise to a book amount of the investment instrument that exceeds the amortized cost that would have been accounted for had there not existed the loss generated by the impairment of the value of the instrument at the reversal date. The amount of the reversal is registered in the result of the period.

4. Investments in subsidiaries, associates, and participations in joint ventures
   a) Valuation (equity method)
   Investments registered in this category shall be valued applying the equity method. Under this method, the investment is initially recorded at cost, separating, in the case of investments in subsidiaries, associates, and participations in joint ventures, the higher value paid for the portion that corresponds to the investor in the net fair value of identifiable assets and liabilities of the investee. b) Gains and losses and other adjustments The gain or loss originating from the recognition of the portion corresponding to it in the result of the period obtained by the investee entity after the acquisition date, shall be recognized in the result of the period. When variations in the equity of the investee are due to variations in Other Comprehensive Income, the portion corresponding to the investor shall be recognized in Other Comprehensive Income and accumulated in equity accounts. Distributions received from the investee reduce the book value of the investment. As stated in IAS 28, gains and losses arising from "upstream" and "downstream" transactions between the investor and the subsidiary or associate shall be recognized in the financial information of the first only to the extent that they correspond to the participations of other investors in the subsidiary or associate not related to the investor. c) Impairment losses When it is identified that one or more of the investments in subsidiaries, associates, and participations in joint ventures have suffered an impairment of their value, according to what is provided in Article 12th, said impairment shall correspond to the difference between the book value and the recoverable amount of the investment, following the guidelines of IAS 36 "Impairment of Assets". The book amount of the investment shall be reduced until it reaches its recoverable amount. The impairment loss shall be recognized immediately in the result of the period. d) Reversal of impairment losses The company shall evaluate if there is any indication that the impairment loss recognized, in previous periods, no longer exists or could have decreased. If such indication exists, the company shall re-estimate the recoverable amount of the investment. The reversal of the impairment loss shall be recognized in the result of the period. In no case, the reversal may generate that the value of the investment exceeds the value it would have if the equity method had always been applied.

Article 11th.- Valuation at fair value of investment instruments
Fair value is associated with the value observed in market transactions under "normal" situations and mutual independence. It should be noted that fair value takes into account the credit quality of the instrument. In this sense, the general criteria for determining fair value are the following:
a) When instruments are quoted in active markets, the fair value is determined by the price observed in said markets. It should be indicated that a financial instrument is considered as quoted in an active market if quotation prices are easily and regularly available through a centralized trading mechanism and those prices reflect current market transactions that occur regularly between parties acting in a situation of mutual independence. The market price of capital-representing instruments shall be the closing price. For the case of debt-representing instruments, the market price shall be the "bid" price, i.e., the purchase price, representing firm proposals. b) If the observed quotation on prices in an active market does not refer to the financial instrument in its entirety, but there is an active market for its components, the fair value shall be determined based on the relevant market prices of said components. c) When dealing with instruments quoted in non-active markets, the fair value is determined using valuation techniques or models, which use to the greatest extent possible data coming from the market and minimize the use of data provided by the entity. It should be noted that a market is considered non-active for not having sufficient quotations from free-access price sources for a period not less than thirty (30) calendar days. d) When dealing with unquoted instruments, the fair value shall be determined using valuation techniques or models. Among valuation techniques includes the use of recent market transactions between informed interested parties acting in conditions of mutual independence, if available. Companies must have adequate valuation methodologies and techniques that allow obtaining the fair value of said instruments, which must incorporate all factors that market participants would consider to establish a market price and be coherent with accepted economic methodologies for establishing prices of investment instruments. Companies must, periodically, calibrate their valuation models and examine their validity using observable current operation prices in the market on the same instrument. Such methodologies and models must observe the guidelines that the Superintendency might dictate through norms of general application. Changes incorporated in the models must be validated and documented. For those instruments not quoted in active markets, which are included in the Price Vector, said source of information may be taken into account, in accordance with what is established in the Price Vector Regulation approved by SBS Resolution No. 945-2006 of July 25, 2006 and its modifications. The Superintendency, at the request of the company, may define certain valuations granted by entities providing asset valuation services or price provider companies as valid. When fair value is determined using valuation techniques or models different from the Price Vector, the Superintendency may request adjustments to those models that in its
judgment do not meet minimum requirements of technical robustness or that are based on insufficient market information. The models must be previously approved by the Company's Board of Directors and must be available to the Superintendency. Capital instruments that do not have quoted prices in active markets and whose fair value cannot be estimated reliably, shall be measured at cost. Said instruments must be registered in the Available for Sale category.

Article 12th.- Evaluation of impairment evidence.
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Companies will evaluate, on the date of preparation of quarterly financial statements, if there is evidence that an instrument classified as available-for-sale investment, held-to-maturity investment, investments in subsidiaries, associates, and participations in joint ventures, registers an impairment of value. It is considered that there is an impairment of value, if there is objective evidence of the impairment as a consequence of an event that has occurred after the initial registration of the investment instrument and said event, causing the loss, has an impact on the future cash flows of the instrument that can be estimated reliably.

7 Article substituted by SBS Resolution No. 2610-2018 of 04/07/2018.

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The accounting record of the impairment and its reversal must follow the guidelines established in Article 10 of this Regulation.
The identification and quantification of the impairment of value must be in charge of the Risk Unit. The results of the impairment analysis must be collected in a Report, which must be brought to the knowledge of the Risk Committee or whoever performs said function, and be available to the Superintendency. For purposes of the impairment evaluation, the following shall be taken into account:
a) Instruments classified as available-for-sale investment and held-to-maturity investment The identification of impairment for instruments classified as available-for-sale investments and held-to-maturity investments shall be carried out applying the "Standard Methodology for the Identification of Impairment of Value of Available-for-Sale Investments and Held-to-Maturity Investments", which is detailed in the Annex that forms part of this norm. In case a company wishes to apply a more sophisticated and different methodology for the identification of impairment of value than the methodology of the referred Annex, it must request prior authorization from this Superintendency, sending the following documentation:
i) Authorization request signed by the General Manager. ii) Internal methodology for the identification of impairment of value. iii) "Report supporting the methodology for the identification of impairment of value", which must contain, at minimum, the following:

• Detail of qualitative and quantitative criteria for the identification of impairment of value of available-for-sale investments and held-to-maturity investments.
• Support for the choice of each criterion.
• Sources of information to collect qualitative or quantitative criteria.
• Justification for the use of the methodology (reasons why the proposed methodology is considered to identify the impairment of value more precisely).
• Other relevant aspects for the impairment methodology.
  iv) Copy of the minutes of the Risk Committee where the approval of the methodology indicated in point ii is recorded.
  Any update, modification, or change that the entity wishes to make to the methodology authorized by this Superintendency must also be authorized prior to its application. For this purpose, the company must attach the following documentation:
  i) Authorization request signed by the General Manager. ii) Update, modification, or changes in the Internal Methodology for the identification of impairment of value. iii) "Report supporting the update, modification, or changes in the methodology for the identification of impairment of value", which must contain, at minimum, the following:

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• Detail of modifications in qualitative and quantitative criteria for identifying impairment of available-for-sale investments and held-to-maturity investments.
• Support for the modification of each criterion.
• Information sources to collect the qualitative or quantitative criteria that have been modified.
• Justification for the modification of the methodology (reasons why changes in the methodology will serve to identify impairment more accurately).
• Other relevant aspects referred to modifications in the impairment methodology.
  iv) Copy of the Minutes of the Risk Committee where the approval of the methodology indicated in point ii is recorded.
  The Risk Unit shall be responsible for documenting the impairment evaluation under the standard methodology or the methodology authorized by the Superintendency. b) Investments in subsidiaries, associates, and joint venture interests The company must evaluate whether there is any indication that a subsidiary, associate, or joint venture interest may have been impaired, considering the guidelines established in IAS 36. Companies must document the aforementioned evaluation and have such support available for inspection by the Superintendency.
  Article 13.- Foreign Exchange Differences.
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  For investments at fair value through profit or loss, gains or losses from foreign exchange differences shall be recognized in the period's result.
  Regarding available-for-sale investments, gains or losses from foreign exchange differences related to the amortized cost of debt instruments affecting the period's result, provided they are not instruments used for hedging purposes. For this effect, the following procedure shall be followed:
• First, the difference between:
  i. The amortized cost in national currency at the reporting date, using the closing accounting exchange rate; and,
  ii. The amortized cost of the previous period using the closing exchange rate of said period, plus accrued interest from the previous reporting date to the reporting date, using the average or closing exchange rate of the period, minus interest collected from the previous reporting date to the reporting date, using the exchange rate of the transaction date.
  This difference must be recognized as a gain or loss from foreign exchange differences, in period result accounts.
• Second, the fair value of the investment at the reporting date must be determined and

8 Article substituted by Resolution SBS N° 2610-2018 dated 04/07/2018.

16/27 expressed in national currency at the closing accounting exchange rate, where the difference between the fair value in national currency and the amortized cost in national currency (resulting from the adjustment in the previous point) at the reporting date must be recognized as a gain or loss from fair value fluctuation, as appropriate, in equity accounts (unrealized gain or loss), presented in other comprehensive income. In the case of capital-representative instruments classified in the category of available-for-sale investments, gains or losses from foreign exchange differences shall be presented in other comprehensive income, accounted for in equity accounts, provided they are not hedging transactions. For investment instruments classified as held-to-maturity investments, gains or losses from foreign exchange differences shall be recognized in the period's result, provided they are not hedging transactions. In the case of investments in subsidiaries, associates, and joint venture interests, the guidelines established in IAS 21 "The Effects of Changes in Foreign Exchange Rates" shall apply. In all cases described, the recording of gains or losses from foreign exchange differences of operations for hedging purposes shall be carried out in accordance with the provisions on the matter issued by the Superintendency.
Article 14.- Interest, Dividends, and Other Adjustments
Regardless of the category in which debt-representative instruments are classified, value adjustments made due to readjustment factors, as well as interest calculated according to the effective interest rate method, shall be recognized in the period's results.
Dividends shall be recognized when the company's right to receive payment is established.
Dividends corresponding to capital-representative instruments classified in the fair value through profit or loss or available-for-sale categories shall be recognized in the period's result. Dividends received in shares must be recognized at their acquisition cost (zero), modifying the unit average cost (not the total) and subsequent valuation shall be recorded according to the instrument's category.
CHAPTER IV
CHANGES IN CATEGORY AND SALE OF INVESTMENTS
Article 15º.- Changes in classification category
Investment instruments maintained by companies may be subject to reclassification within the framework of the provisions of this article. a) Investments at fair value through profit or loss The company is prohibited from reclassifying an investment instrument from or into the category of investments at fair value through profit or loss while said investment instrument is in its possession, except for the case of a capital-representative instrument that ceases to have market quotations and it is not possible to obtain a reliable estimate of its fair value. Exceptionally, those investment instruments classified as investments at fair value through profit or loss that are delivered as collateral shall be reclassified to available for sale. Upon completion of the guarantee contract, the aforementioned instruments shall be reclassified to their initial category, transferring unrealized results to period results. 9 b) Held-to-maturity investments to other categories Held-to-maturity investments cannot be moved to another category, unless as a result of a change in the financial capacity to hold an investment, the classification as held until maturity ceases to be adequate. In this case, it shall be reclassified as an available-for-sale investment and measured at fair value. The difference between its book amount and fair value shall be accounted for according to the valuation criteria for this category of investments. This category change is subject to the restriction described in Article 17°. c) Available-for-sale investments to held-to-maturity investments If it is appropriate to account for an investment at amortized cost instead of its fair value, due to a change in the company's financial capacity, or when the period has elapsed during which companies cannot classify as "held-to-maturity" referred to in Article 17°, the book amount of the fair value of the investment instrument at that date shall become its new amortized cost. Any previous result of that instrument, previously recognized directly in equity, shall be brought to the period's result over the remaining life of the held-to-maturity investment, using the effective interest rate method. Any difference between the new amortized cost and the amount at maturity shall also be amortized over the remaining life of the investment instrument using the effective interest rate method, similar to the amortization of a premium or discount. If the investment instrument subsequently suffers impairment, any gain or loss that had been recognized directly in equity shall be transferred and recognized in the period's result. Changes in the category of investment instruments carried out in accordance with what is established in this Regulation must be communicated to the Superintendency, through Annex No. 1 "Investments" of the Accounting Manual corresponding to the period in which said transfer occurred.
Article 16º.- Sales or assignment of held-to-maturity investments
The sale or assignment of an instrument before its maturity does not contradict the company's intention and capacity to hold them until maturity, in any of the following circumstances:
a) That they occur on a date very close to maturity, that is, less than three (03) months from maturity, such that changes in market rates would not have a significant effect on fair value, or when a small part remains, equal to or less than ten percent (10%), of the principal of the investment to be amortized according to the instrument's amortization plan;

9 Literal modified by Resolution SBS N° 5790-2014, dated 01-09-2014.

18/27 b) When they respond to isolated, uncontrollable, or unexpected events, such as: the existence of financial difficulties of the issuer, a significant deterioration in solvency or important variations in the credit risk of the issuer; changes in legislation or regulation; or other external events that could not be foreseen at the time of initial classification. The intention and capacity of the company to hold until maturity are also not contradicted for those investment instruments classified as held-to-maturity investments when said instruments are delivered as collateral, or transferred through a repurchase operation, provided that in the cases described, the company maintains the intention and remains contractually and financially in a position to hold the investment until maturity. 10 In any of the cases described, the company must maintain information on each of the sales or transfers. This information must be sent to the Superintendency together with Annex No. 1 "Investments" of the Accounting Manual and must contain the reasons for the sale or transfer of investment instruments classified as held-to-maturity investments; as well as, if applicable, a detailed description of the instruments in which the total amount obtained as a result of the sale will be reinvested.
Article 17º.- Consequences of the sale or reclassification of held-to-maturity investments
Any sale or assignment, as well as the transfer to the available-for-sale category, of any held-to-maturity investment instrument that does not comply with what is established in this Regulation, obliges the company to reclassify all instruments in the held-to-maturity category to the category of available-for-sale instruments. Likewise, a company cannot use the "Held-to-Maturity Investments" classification when, during the current period or the two preceding ones, it has sold or reclassified an instrument classified in this category without complying with what is established in Article 16°. However, if the sale of these instruments was originated by financial difficulties of the issuer, a significant deterioration in its solvency, or important variations in its credit risk described in literal b) of Article 16°, and the company reacquires instruments from the same issuer, these cannot be registered in the held-to-maturity investments category, unless there is prior and express authorization from the Superintendency. Upon completion of the period indicated in the second paragraph, the company may use the mentioned category and reclassify the investment instruments it possesses, provided they meet the requirements established in Article 7°.
Article 18°.- Corrective Measures
Companies that make category changes with the purpose of hiding losses and/or showing profits, or any other use that the Superintendency considers inadequate, are prohibited from distributing dividends as provided in Article 354° of the General Law.

10 Literal modified by Resolution SBS N° 5790-2014, dated 01-09-2014.

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CHAPTER V
CUSTODY
Article 19º.- Custody of local investment instruments
For the custody of local investment instruments, companies may choose to assume the custody of their investment instruments themselves or hire the services of a local custody company.
If the company decides to assume the custody labor, it must assign within its organizational structure, an area in charge of custody, which shall be subject to the following minimum requirements:
a) Have adequate security systems, b) establish information reserve policies, c) develop internal control systems, and d) other requirements communicated by the Superintendency through a general application norm.
Furthermore, the company assuming the custody labor must hire at least the services of:
a) An Authorized Securities Compensation and Clearing Institution (ICLV) authorized by the Market Supervisory Authority, for the registration and settlement of transactions carried out with investment instruments represented by account entries; b) A direct participant of an ICLV, for the cash settlement of transactions carried out with investment instruments represented by account entries; and, c) An institution authorized to provide the service of physical safekeeping of investment instruments represented by physical titles. Companies must inform the Superintendency of the hiring of these services. When companies decide to hire the services of a local custody institution, they must be satisfactory to the Superintendency.
Article 20º.- Custody of investment instruments abroad
Companies shall keep their investments capable of being custodied in foreign custody institutions. For this, companies must previously evaluate that the custody institution meets the following requirements:
a) Be a global custody institution duly registered and authorized by the corresponding regulatory body. b) Be a participant, directly or through a sub-custodian, in the depository institutions of foreign investment instruments, except those that by the nature of their issuance are not registered in depository institutions; c) Maintain a long-term debt risk rating not lower than “A”, according to the rating equivalences indicated in Circular SBS N° AFP -95-2008, granted by at least two (2) of the rating agencies indicated in said circular. d) Alternatively, if the custody institution does not meet the previous requirement, it must satisfy the following requirements: (i) have as one of its main revenue-generating activities the custody business; (ii) possess extensive experience providing custody services in the financial and insurance sectors; and, (iii) possess at least one rating, granted to it or to any of its debt instruments,

20/27 that complies with the guidelines established in the previous paragraph, according to the equivalencies indicated in Circular N° AFP -95-2008. e) Guarantee the execution of credits and debits corresponding to the rights and obligations of the investment instruments that are subject to custody; f) Guarantee the conservation and integrity of the investment instruments under custody, whether they are in physical safekeeping or in transit, through the coverage of insurance policies contracted for these effects; g) Value investment instruments subject to custody daily; h) Supply the Superintendency, at the time and manner determined, all information concerning the services provided to companies; i) Others established by the Superintendency. The evaluation of compliance with the requirements performed by the company must be duly documented. In the event of non-compliance with any of the requirements by the custody institution, companies must resolve the contract and hire the service with another custody institution that meets the requirements established in this Regulation. In this sense, a deadline of no more than thirty (30) days is established to withdraw instruments in custody, whether they are in physical safekeeping or in transit, through the coverage of insurance policies contracted for these purposes.
Article 21º.- Information on custody institutions
Companies will communicate to the Superintendency the hiring of custody institutions, indicating the name or corporate name of the latter, country of incorporation, experience, and, if applicable, the required risk classifications.
When companies terminate the contract with a custody company, they must communicate this to the Superintendency, indicating the causes that motivated such termination, within a deadline of no more than fifteen (15) days after terminating the contract. Companies must document these situations and have such support available for inspection by the Superintendency.
CHAPTER VI
INTERMEDIATION AND TRADING MODALITIES
Article 22º.- Intermediation of investment instruments
Prior to contracting the services of investment instrument intermediaries, companies must evaluate that said intermediaries are duly authorized, regulated, and supervised by the competent authorities of the corresponding markets.
Companies must communicate to the Superintendency the hiring of intermediary entity services, indicating the name or corporate name of the latter and the result of the evaluation performed.
Article 23°.- Trading
The period for carrying out the "Settlement" corresponding to transactions carried out with investment instruments shall not exceed the number of days representing the uses and customs established in the corresponding markets. Charges and credits for the payment or collection of purchases or sales, as appropriate, of investment instruments, shall be carried out on the "Settlement" date, under the "Delivery versus Payment" modality.
CHAPTER VII
FINAL AND COMPLEMENTARY PROVISIONS
First.- Application of international accounting standards The provisions established in this Regulation are in concordance with the criteria contained in IAS 32 "Financial Instruments: Presentation", IAS 39 "Financial Instruments: Recognition and Measurement" and its Application Guide, IAS 21 "The Effects of Changes in Foreign Exchange Rates", IAS 28 "Investments in Associates", IAS 31 "Interests in Joint Ventures", IAS 36 "Impairment of Assets", IFRS 3 "Business Combinations", and IFRS 7 "Financial Instruments: Disclosures" in force in Peru. Therefore, the aforementioned IAS and IFRS are applicable insofar as they do not oppose what is established in this Regulation. Second.- Commodities Investment in commodities shall be accounted for in accordance with the criteria established for investments at fair value through profit or loss. Third.- Application of a costing method for the investment portfolio In the case of carrying out more than one operation with a certain instrument, the company must choose the weighted average cost formula or the FIFO (first-in, first-out) formula. Said formula shall also be taken into consideration for the application of the effective interest rate methodology. Fourth.- Requirement for impairment adjustments and additional provisions 11 When, in the opinion of the Superintendency, there is any distortion in the calculation of the valuation of investments or operations within the scope of this Regulation, the company will be required to justify the calculations performed or proceed to make impairment adjustments or establish additional provisions. Fifth.- Covered items Investment instruments designated as covered items in a defined accounting hedge in accordance with the norms issued by the Superintendency shall be measured in accordance with said norms. Sixth.- Effective equity and risk-weighted assets 12 Effective Equity The excess of unrealized losses on available-for-sale investments over accumulated profits and period profit, without agreement to capitalize profits or agreement to capitalize future profits, must be deducted from effective equity. In the event that there are no accumulated profits nor period profit, without agreement to capitalize profits or agreement to capitalize future profits, the total of unrealized losses on available-for-sale investments shall be deducted from effective equity.

11 Provision modified by Resolution SBS N° 2610-2018 dated 04/07/2018.
12 Provision modified by Resolution SBS N° 603-2016 dated 02/02/2016.

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Unrealized gains from investments available for sale shall not be part of effective equity.
Risk-weighted assets
Items or entries that are deducted in the determination of effective equity must not be considered within risk-weighted assets.
Seventh.- Application of the Regulation to other entities.
The provisions of this Regulation are applicable to Derramas and Benefit Funds under the supervision of the Superintendency, to the Peruvian Federation of Municipal Savings and Credit Banks (FEPCMAC) and to the Fund of Municipal Savings and Credit Banks (FOCMAC), taking into account for accounting registration, the plans or chart of accounts applicable to them. Second Article.- The Annex “Standard Methodology for the Identification of Impairment of Financial Instruments” referred to in the new Regulation on Classification and Valuation of Investments of Financial System Companies approved by article one of this resolution, is published in the Institutional Portal –www.sbs.gob.pe– in accordance with what is established in Supreme Decree No. 001-2009-JUS. Third Article.- Modify the Regulation for the Negotiation and Accounting of Derivative Financial Products in Financial System Companies, approved by SBS Resolution No. 1737-2006 and its modifying norms, as follows:

1. Modify article 1° “Scope” as follows:
   “Scope
   Article 1°.- This norm applies to the companies included in letters A and B of article 16° of the General Law, to the Guarantee Fund for Loans to Small Industry (FOGAPI), to the Development Finance Corporation (COFIDE), to the National Bank, to the Agricultural Bank and to MIVIVIENDA S.A. Fund, hereinafter companies.”
2. Modify letter l) of Article 2° “Definitions”, as follows:
   “Definitions
   Article 2°.- For the purposes of the following device, consider the following definitions:
   (…) l) Investment Regulation: Regulation on Classification and Valuation of Investments of Financial System Companies.”
3. Modify article 9° “Embedded Derivatives”, as follows:
   “Embedded Derivatives
   Article 9°.- An embedded derivative must be separated from the host contract and, consequently, treated accounting-wise as an independent derivative if and only if the following three conditions are met simultaneously:

23/27 a. The economic characteristics and inherent risks of the embedded derivative are not closely related to those of the host contract. b. A separate instrument with the same conditions as the embedded derivative would meet the definition of a derivative financial product.
c. The combined instrument is not accounted for at fair value with changes in results.
If a company, being obliged to separate the embedded derivative from the host contract, could not measure the embedded derivative separately or its measurement was not reliable, either at the acquisition date or subsequently, it must treat the complete combined instrument as an investment at fair value with changes in results or a liability measured at fair value with changes in results. When their separation occurs, embedded derivatives must be recorded and valued as trading financial products, unless designated for hedging purposes. In either of the two cases, they must be reported separately in Annex No. 8 “Positions in Derivative Financial Instruments” of the Accounting Manual. Financial assets or liabilities whose return is indexed to the behavior of a foreign currency and are payable in another currency different from it, including the new sol, will be considered combined instruments, where the embedded currency derivative product (forward or option, depending on whether there is leverage or not) must be separated from the host contract and accounted for at its fair value.”
4. Incorporate into article 10° “Types of Accounting Hedging” the following:
“Types of Accounting Hedging
Article 10°.- The accounting hedges subject to this Regulation may be of three types:
(…)
c. Hedge of a net investment in a foreign entity: The definitions of foreign business and net investment in a foreign entity are the same as those indicated in IAS 21 “The Effects of Changes in Foreign Exchange Rates”. Hedges of a net investment in a foreign business, including the hedge of a monetary item that is accounted for as part of a net investment, will be accounted for similarly to cash flow hedges.”
5. Any reference to hybrid instrument or hybrid financial instrument shall be replaced by combined instrument or combined financial instrument, as appropriate.
6. Any reference to the National Commission for the Supervision of Companies and Securities –CONASEV is replaced by the Securities Market Superintendency –SMV.
Fourth Article.- This resolution enters into force starting in January 2013, with the Regulation on Classification and Valuation of Investments of Financial System Companies approved by SBS Resolution No. 10639-2008 of October 31, 2008 and its modifying norms, as well as any other provision that opposes what is established by this resolution, being repealed from said date.

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Register, communicate and publish,
DANIEL SCHYDLOWSKY ROSENBERG
Superintendent of Banking, Insurance and Private Pension Fund Administrators

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ANNEX
STANDARD METHODOLOGY FOR THE IDENTIFICATION OF IMPAIRMENT OF VALUE OF INVESTMENTS AVAILABLE FOR SALE AND INVESTMENTS AT MATURITY 13 Companies must apply the methodology quarterly, upon the preparation of their quarterly financial statements, to all debt and capital instruments classified in the categories of investments available for sale and investments at maturity.
I. Debt instruments
Companies must evaluate, for the entire portfolio of debt instruments subject to impairment, the occurrence of the following situations:

1. Weakening in the financial situation or financial ratios of the issuer and its economic group.
2. Downgrade in any of the credit classifications of the instrument or the issuer, by at least two (02) “notches”, from the moment the instrument was acquired; where a “notch” corresponds to the minimum difference between two risk ratings within the same rating scale.
3. Interruption of transactions or of an active market for the financial asset, due to financial difficulties of the issuer.
4. Observable data indicate that since their initial recognition of a group of financial assets with characteristics similar to the instrument evaluated, there is a measurable decrease in their estimated future cash flows, although it cannot yet be identified with individual financial assets of the group.
5. Decrease in value due to regulatory changes (tax, regulatory or other governmental).
6. Significant decrease in fair value below its amortized cost. A significant decrease will be considered if the fair value at the closing date has decreased by at least 40% below its amortized cost at that date.
7. Prolonged decrease in fair value. A prolonged decrease will be considered if the fair value at the closing date has decreased by at least 20% compared to the amortized cost twelve (12) months ago, and the fair value at the closing date of each month during the previous twelve (12) month period, has always remained below the corresponding amortized cost at the closing date of each month.
   The fair value to be used for evaluating criteria 6 and 7 is that considered for the purposes of the valuation of debt instruments available for sale, in accordance with the criteria established in article 11 of this Regulation, regardless of the accounting classification of the debt instrument. However, if the total or partial decline in fair value in the representative debt instrument is a consequence of an increase in the risk-free interest rate, this decline should not be considered for the evaluation of criteria 6 and 7. 14

13 Title and Annex substituted by SBS Resolution No. 2610-2018 of 04/07/2018.
14 Paragraph substituted by SBS Resolution No. 4034-2022 published on 30/12/2022.

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In case at least two (2) of the previously described situations are met, it will be considered that impairment exists and, consequently, the company must determine the amount of any impairment loss according to what is established in article 10 of the Regulation.
In case at least two (2) of the above-described situations have not occurred, it will suffice for any of the following specific situations to be present to consider that impairment exists:

1. Breach of contractual clauses, such as interruption in the payment of interest or principal.
2. Renegotiation of the contractual conditions of the instrument due to legal factors or financial problems linked to the issuer.
3. Evidence that the issuer is in the process of forced restructuring or bankruptcy.
4. When the risk classification of an instrument that was classified as investment grade is reduced to a classification that falls below investment grade.
   The company must determine the amount of any impairment loss according to what is established in article 10 of the Regulation.
   II. Capital instruments
   Companies must evaluate, for capital instruments subject to impairment, the occurrence of the following situations:
5. When the risk classification of an issuer's debt instrument that was classified as investment grade is reduced to a classification that falls below investment grade.
6. Significant changes have occurred in the technological, market, economic or legal environment in which the issuer operates, which may have adverse effects on the recovery of the investment.
7. Weakening in the financial situation or financial ratios of the issuer and its economic group.
8. Interruption of transactions or of an active market for the financial asset, due to financial difficulties of the issuer.
9. Observable data indicate that since their initial recognition of a group of financial assets similar to the instrument evaluated, there is a measurable decrease in their estimated future cash flows, although it cannot yet be identified with individual financial assets of the group.
10. Decrease in value due to regulatory changes (tax, regulatory or other governmental).
    In case at least two (2) of the described situations are met, it will be considered that impairment exists and, consequently, the company must determine the amount of any impairment loss according to what is established in article 10 of the Regulation.

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In case at least two (2) of the above-described situations have not occurred, it will suffice for any of the following specific situations to be present to consider that impairment exists:

1. Significant decrease in fair value below its acquisition cost. A significant decrease will be considered if the fair value at the closing date has decreased by at least 40% below its cost value.
   As cost value or acquisition cost, the initial cost will always be taken as reference, regardless of whether an impairment of value has been previously recognized for the analyzed capital instrument.
2. Prolonged decrease in fair value. A prolonged decrease will be considered if the fair value at the closing date has decreased by at least 20% compared to the fair value twelve (12) months ago, and the fair value at the closing date of each month during the previous twelve (12) month period, has always remained below the acquisition cost.
3. Breach of statutory provisions by the issuer, related to the payment of dividends.
4. Evidence that the issuer is in the process of forced restructuring or bankruptcy.
   The fair value to be used for evaluating the situations indicated in items 1) and 2) is the fair value considered for the purposes of the valuation of capital instruments available for sale, in accordance with guidelines established in article 11. The aforementioned items 1 and 2 are not applicable to capital instruments classified in the available for sale category and valued at cost due to the absence of a reliable fair value. The company will determine the amount of any impairment loss according to what is established in article 10 of the Regulation. This Superintendency may carry out its own analysis of the instruments that make up the portfolio of investments in debt and capital instruments and determine which instruments, in its opinion, have suffered impairment of value and require companies to recognize them, according to what is established in article 10 of the Regulation.