Temporary Standard for the Deferral of Credit Portfolio Provisions and for the Treatment of Assets Received in Credit Recovery

Page 1 of 12 Resolution No. CD-SIBOIF-1111-1-MAY7-2019 Dated May 7, 2019 TEMPORARY STANDARD FOR THE DEFERRAL OF CREDIT PORTFOLIO PROVISIONS AND FOR THE TREATMENT OF ASSETS RECEIVED IN CREDIT RECOVERY

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

CONSIDERING

I That in accordance with what is established in Article 10, numeral 1) of Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions, published in La Gaceta, Official Journal No. 196, of October 14, 1999, and its reforms; contained in Law No. 974, Law of the Nicaraguan Legal Digest of the Banking and Finance Matter, published in La Gaceta, Official Journal No. 164, of August 27, 2018, and its reforms (Legal Digest Law), it corresponds to the Board of Directors of the Superintendence of Banks and Other Financial Institutions to issue general norms to strengthen and preserve the security and confidence of the public in the institutions under the supervision, inspection, surveillance, and auditing of the Superintendence.

II That according to what was stated above and based on the faculty established in Article 3, numerals 3 and 13, and Article 10, numeral 7, of the aforementioned Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; contained in the Legal Digest Law.

In exercise of its faculties,

HAS ISSUED

The following,

CD-SIBOIF-1111-1-MAY7-2019 TEMPORARY STANDARD FOR THE DEFERRAL OF CREDIT PORTFOLIO PROVISIONS AND FOR THE TREATMENT OF ASSETS RECEIVED IN CREDIT RECOVERY

CHAPTER I GENERAL PROVISIONS

Article 1. Objective.- The purpose of this standard is to establish temporary conditions for the deferral of provisions for consumer loans, credit cards, extra-financing, mortgages, microcredit, and commercial loans, which allow financial institutions to rehabilitate the activities that generate cash flow to foster credit activity; as well as to establish transitional provisions for the management of real estate assets received in payment or adjudicated.

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Article 2. Scope.- The provisions of this standard are applicable to banks, financial companies, and insurance, reinsurance, and guarantor companies, which for the purposes of this standard will be referred to as "financial institutions."

CHAPTER II DEFERRAL OF CREDIT PORTFOLIO PROVISIONS

Article 3. Deferral of provisions.- Financial institutions may defer the additional provisions to be constituted in accordance with the "Standard on Credit Risk Management" (NGRC), for the credits indicated in Article 1, which on April 30, 2019, had a credit classification of "A" or "B" and which at the time of evaluation in the period from May 1, 2019, to December 31, 2019, are "C" or "D". This provision does not apply to credits with an "E" rating.

The deferral of additional provisions must be carried out within a maximum period of two years. In case the credit term is shorter than the aforementioned period, the deferral will be adjusted to the credit term.

The aforementioned provision does not apply to debtors reclassified by the Superintendence; in that sense, the financial institution must immediately constitute 100% of the provisions corresponding in accordance with the aforementioned standard.

Article 4. Calculation Method.- The provision to be deferred will be calculated according to the following formula:

MPD = Pt − Pt−1

Where: MPD = Amount of provision to be deferred. t = Month in which the credit is evaluated for the application of this standard. Pt = Provision calculated according to risk classification in accordance with the NGRC at time t. Pt-1 = Provision calculated and accounted for according to risk classification in accordance with the NGRC at time t-1.

Article 5. Changes in the credit risk classification during the deferral period.- In case the credit risk classification improves, the provision to be deferred must be recalculated, and if there is an excess of provision relative to what is required by the new risk classification, this must be used to constitute deferred provisions for other credits that have adhered to this standard. Once 100% of the provisions to be deferred for the total portfolio adhered to this standard has been constituted, the provisions released by the improvement in classification may be used by the financial institution. Likewise, in the case that the credit risk classification worsens to category "E", the total provision of the credit must be registered, and consequently, its deferral is permanently suspended.

Article 6. Formalization, registration, and information supply.- For the formalization, follow-up, registration, and identification in the Risk Central (CDR) of the credits subject to the provisions of this standard, the following procedure will be followed:

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a) For its formalization and follow-up, what is established in the NGRC regarding extension, restructuring, or refinancing must be complied with. b) These operations must be registered in accordance with what is established in the Accounting Frameworks applicable to the financial institutions referred to in this standard. c) The credits subject to the deferral of provisions must be identified in the report to the CDR, detailing the provision corresponding to it in accordance with the NGRC, the amount of the provision to be deferred, and the residual term in which the provision is being deferred, in accordance with the annex attached to this standard, which is an integral part of it.

Article 7. Conditions.- For the purposes of the deferral of provisions, the following restrictions are established: a) The provisions pending to be constituted under this standard cannot exceed 5% of the gross credit portfolio as of April 30, 2019. b) The provisions pending to be constituted must be deducted for the calculation of capital adequacy, which at all times must not be less than 12%. c) If upon the entry into force of this standard the financial institution had a balance of generic provisions, this must be used in its entirety to complement the provisions for those credits subject to deferral. d) While the period of deferral of provisions elapses, institutions cannot distribute cash or cash-equivalent profits. e) Credits in which diversion of funds and/or guarantees for other activities that were not the object of the credit are evidenced, cannot apply to the deferral of provisions.

CHAPTER III ASSETS RECEIVED IN CREDIT RECOVERY

Article 8. Appraisals.- Appraisals of real estate assets received in payment or adjudicated, referred to in Article 42 of the NGRC, that expire during the period from April 1, 2019, to June 30, 2019, are suspended for a period of three (3) months. Once the aforementioned term has elapsed, financial institutions must update the appraisals of these assets within the month immediately following the end date of the suspension period.

Article 9. Provisions for changes in the sales plan.- The provisions for those real estate assets received in payment or adjudicated that are reclassified from IFRS 5 to the Assets Received in Credit Recovery account, in the period from May 1, 2019, to December 31, 2019, cannot be less than the following percentages of the asset value recorded in the books:

a) 30% minimum provision up to 12 months from the adjudication of the asset.

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b) 50% minimum provision after 12 months up to 24 months from the adjudication. c) 75% minimum provision after 24 months up to 48 months from the adjudication. d) 100% provision after 48 months from the adjudication.

The provision constituted on April 30, 2019, for these assets is not subject to reversal by the aforementioned provision.

CHAPTER IV FINAL PROVISIONS

Article 10. Follow-up.- Financial institutions must have information systems that allow the identification and follow-up of credits subject to the deferral of provisions, including the provision corresponding to it in accordance with the NGRC, the amount of the provision to be deferred, and the residual term in which the provision is being deferred, establishing specific policies and procedures approved by their Board of Directors for the management and follow-up of said credits, in accordance with the criteria established in this standard.

Article 11. Faculty of the Superintendent.- The Superintendent of Banks and Other Financial Institutions is authorized to approve the changes or modifications that are necessary for the adaptation and updating of the annex of this standard, being able to issue additional instructions for the correct application thereof.

Article 12. Application of NGRC.- For aspects not contemplated in this standard, what is established in the NGRC will apply.

Article 13. Validity.- This standard will enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Journal.

Page 5 of 12 Name of the Institution: Figures as of: name id_type_document id_person id_credit id_credit_status id_currency id_credit_type id_credit_modal balance current_interest overdue_interest provision (Pt) accumulated provision from previous month (Pt-1) Amount of provision to defer (MPD) provision of the month Accumulated Provision of the current month id_credit_classif ation days_principal_delinquency days_interest_delinquency Date of formalized deferral date_credit_maturity Term of residual deferral Real Guarantee Liquid Guarantee Natural or Legal Person Credits Guarantee

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I. ANNEX INFORMATION ON CREDITS WITH DEFERRAL OF PROVISIONS Complete figures in Cordobas (Credits in deferral condition)

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II. ANNEX INSTRUCTIONS: INFORMATION ON CREDITS WITH DEFERRAL OF PROVISIONS Order Field Description Catalog 1 name Indicates the name or corporate name of the natural or legal person, national or foreign, which must correspond to the identification document presented by the same. In the case of natural persons, first names must be reported first and then surnames. 2 id_type_document Type of Document. Indicates the description of the type of document corresponding to the identification used by the natural or legal person, national or foreign, who maintains some type of relationship (debtor, guarantor, surety, acquirer of adjudicated assets, related party, linked to the related party, shareholder, employee) with the financial institution, in accordance with the corresponding catalog established in this Manual. id_type_document 3 id_person Person Identification. Number of the identification of the natural or legal person, national or foreign, who maintains a credit operation with provision deferral. 4 id_credit Credit Identification. Corresponds to the reference number assigned to the credit operation, with provision deferral, by the financial institution. For credit card purposes, this will correspond to the account number of the holder. 5 id_credit_status Credit Status. Corresponds to the description that identifies the status in which the credit, with provision deferral, is found at the end of the reported month. id_credit_status

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Order Field Description Catalog 6 id_currency Currency Type. Corresponds to the description that identifies the currency agreed upon for credit operations, in accordance with the corresponding catalog. id_currency 7 id_credit_type Credit Type. Corresponds to the description that identifies the type of credit, in accordance with the Standard on Credit Risk Management and the corresponding catalog. id_credit_type 8 id_credit_modal Credit Modality. Corresponds to the description that identifies the modality of the credit granted by the financial institution in accordance with the corresponding catalog established in this Manual. id_credit_modal 9 balance Corresponds to the principal balance of the credit at the end of the reported month. 10 current_interest Current Interest. Indicates the amount of interest accrued to be collected on the credit at the end of the reported month, which has been generated since the date of the last payment until the date of said closure, which does not include the overdue portion. 11 overdue_interest Overdue Interest. Indicates the amount of interest accrued to be collected on credits and registered accountingly as current, whose portion is in a condition of non-payment: It refers to interest on loans payable at maturity with days of delinquency between 1 to 30 and interest on loans payable in installments with days of delinquency between 1 to 90. These interests will be reported until they are cancelled or the credit is transferred entirely to overdue status, in accordance with the accounting criterion established in the Chart of Accounts Manual (MC).

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Order Field Description Catalog 12 provision (Pt) Amount of the credit provision determined by the financial institution at the end of the month, in accordance with what is established in the Standard on Credit Risk Management currently established by SIBOIF. 13 accumulated provision from previous month (Pt-1) Corresponds to the amount of accumulated provision of the credit and registered accountingly at time t -1. 14 Amount of provision to defer (MPD) Total amount of the provision to be deferred calculated by the financial institution at the end of the month, in accordance with the Temporary Standard for the deferral of credit portfolio provisions and for the treatment of assets received in credit recovery. 15 provision of the month Credit provision of the month calculated by the financial institution with respect to the residual deferral term and registered at the end of the month. 16 Accumulated Provision of the current month Amount of the credit provision accumulated in the current month. 17 id_credit_classifcation Corresponds to the category (A, B, C, D, E) of the credit classification performed by the financial institution as a result of the evaluation process, considering the criteria established in the Standard on Credit Risk Management and in accordance with the description of the corresponding catalog. id_credit_classifcation 18 days_principal_delinquency Principal Delinquency Days. Corresponds to the number of days of principal delinquency elapsed from the due date of the installment or the total credit until the date of closure of the reported month.

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Order Field Description Catalog 19 days_interest_delinquency Interest Delinquency Days. Corresponds to the number of days elapsed from the date established for the payment of interest until the date of closure of the reported month. 20 Date of formalized deferral Corresponds to the first date on which the provision deferral of the credit operation was formalized, which will remain constant during the deferral period. 21 date_credit_maturity Credit Maturity Date. Corresponds to the maturity date of the credit according to what is established in the contract. 22 Term of residual deferral Corresponds to the term (in months) pending deferral of the residual provisions. 23 Real Guarantee Corresponds to the code of the corresponding catalog for the identification of the real guarantee of the credit constituted by the financial institution, in accordance with what is established in the Standard on Credit Risk Management currently established by SIBOIF (see catalog id_has_guarantee) id_has_guarantee 24 Liquid Guarantee Corresponds to the code of the corresponding catalog for the identification of the liquid guarantee of the credit constituted by the financial institution, in accordance with what is established in the Standard on Credit Risk Management currently established by SIBOIF (see catalog id_has_guarantee) id_has_guarantee

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III. General Catalogs Related Table Code Description id_type_document 1 Foreign Natural Residents (Residence Card). 2 Legal Persons (RUC -Nicaragua). 3 Foreign Natural Non-Residents (Passport). 4 Nicaraguan (Citizen Identity Card) 5 Nicaraguan Residents Abroad (Passport). 6 Foreign Natural Diplomatic, Consular, International Organization Officials, and Special Guests (Chancellery Card of the Republic). 7 Non-Profit Legal Persons (MIGOB Card) 8 Residence Card of Nicaraguans residing abroad. 9 Generic Identification / Identification Unknown by the Financial Institution. id_credit_status 6 Active. 7 Cancelled. 8 Sold/Active. 9 Acquired/Active. 10 Acquired/Cancelled. 11 Disposed. 12 active card/plastic cancelled id_currency 1 National without Value Maintenance. 2 National with Value Maintenance. 3 Foreign (US Dollars). 4 Consolidation Currency 5 Euro id_credit_type 1 Consumption. 2 Commercial. 3 Mortgage. 4 MSME 5 Leasing. 6 Trust. 7 Second Tier Portfolio 8 State Development Policies 401 Urban MSME: Individuals. 402 Urban MSME: Solidarity Groups. 403 Rural MSME: Individuals. 404 Rural MSME: Solidarity Groups.

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Related Table Code Description 405 Micro-entrepreneurs – Urban: Individuals. 406 Micro-entrepreneurs – Urban: Solidarity Groups. 407 Micro-entrepreneurs – Rural: Individuals. 408 Micro-entrepreneurs – Rural: Solidarity Groups. 409 Associations or Community Groups: Urban 410 Associations or Community Groups: Rural id_credit_modal 1 Occasional Overdrafts. 2 Contractual Overdrafts. 3 Discounted Documents. 4 Personal Loans. 5 Commercial Loans (includes working capital, fixed assets, business improvement, and vehicle). 6 Agricultural Loans. 7 Livestock Loans. 8 Industrial Loans. 9 Loans to the Non-Financial Public Sector. 10 Loans to Financial Institutions. 11 Personal Credit Cards. 12 Factoring. 13 Financial Leasing. 14 Advance on Export Documents. 15 Issued Letters of Credit. 16 Confirmed Letters of Credit. 17 Acceptances. 18 Sale of Goods on Installments. 19 Purchase of Payment Orders. 20 Purchase of Securities with Resale Agreement. 21 Mortgage Loans for Housing. 22 Loans for Housing or Urban Development. 23 Contingents - Guarantees Granted. 24 Contingents - Joint Payment Guarantees Backed by Agricultural Bank Guarantees. 25 Contingents - Other Joint Payment Guarantees. 26 Contingents - Performance Guarantees. 27 Contingents - Participation Guarantees. 28 Contingents - Agricultural Bank Guarantees. 29 Contingents - Other Guarantees Granted. 30 Contingents - Demand Letters of Credit Backed by Prior Deposit. 31 Contingents - Other Demand Letters of Credit. 32 Contingents - Deferred Letters of Credit Backed by Prior Deposit.

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Related Table Code Description 33 Contingents - Deferred Letters of Credit Backed by Joint Payment Guarantees. 34 Contingents - Deferred Letters of Credit Backed by Agricultural Bank Guarantees. 35 Contingents - Other Deferred Letters of Credit. 36 Contingents - Confirmed Letters of Credit 37 Corporate credit cards. 38 Credit cards for Microfinance operations. 39 Personal - Extra-financing. 40 Intrafin of Personal Credit Cards. 41 Intrafin of Corporate Credit Cards. 42 Intrafin of Credit Cards for Microfinance Operations. 43 Vehicle Loans 44 Salary Advances (ADS) 99 Other Modalities. 1301 Financial Leasing - Real Estate 1302 Financial Leasing - Machinery and Equipment 1303 Financial Leasing - Transport Equipment 1304 Financial Leasing - Others id_credit_classifcation 1 A 2 B 3 C 4 D 5 E 6 A+ 7 B+ 8 C+ id_has_guarantee 0 No guarantee 1 Has guarantee (S) S. Rosales C. (S) M. Díaz O. (S) Fausto Alberto Reyes Báez (S) Illegible (Silvio Moisés Casco Marenco) (S) Illegible (Rafael Ángel Avellán Rivas) RAFAEL ÁNGEL AVELLÁN RIVAS Secretary of the SIBOIF Board of Directors