Instructions for the Approval of New Financial Products and Services — BCR — SV

APRIL 2024
INSTRUCTIONS FOR THE APPROVAL OF
NEW FINANCIAL PRODUCTS AND SERVICES

INDEX

GENERALITIES................................................................................................................................................ 1
OBJECTIVE........................................................................................................................................................... 2
DEFINITIONS.................................................................................................................................................... 2
GENERAL RULES ........................................................................................................................................ 2
SPECIFIC RULES....................................................................................................................................... 4
5.1 Request for New Financial Products and Services ...………...........................…………………………………………..3
5.2 Documentation…………………………………………………………………............................................………………………….....4
5.3 Analysis of the Request………………………………………………………............................................……………………………… 7
5.4 Request Analysis Procedure…………………………….................................………………………………….…...7
5.5 Approval or Denial……………………………………………………........................................ ………………………….…...9
DECLARATION OF EXPIRATION OF REQUESTS .................................................................................... 10
NOTIFICATION TO THE ENTITY AND SUPERINTENDENCY OF THE FINANCIAL SYSTEM.......................................... 10
SPECIAL PROVISIONS ............................................................................................................................ 10
VALIDITY, DISTRIBUTION AND DISCLOSURE..................................................................................................... 10
MODIFICATION CONTROL TABLE .......................................................................................................... 13

CENTRAL BANK
OF RESERVE OF EL
SALVADOR
INSTRUCTIONS FOR THE APPROVAL OF NEW
FINANCIAL PRODUCTS AND SERVICES
DEPARTMENT OF
PUBLIC POLICIES AND
FINANCIAL INNOVATION
PAGE No.
CODE
980504
REVISED
Financial Stability and Public Policies Management APPROVED BY:
Session No. CD-11/2024, of April 22, 2024

GENERALITIES
1.1. BACKGROUND
The development of the Salvadoran financial system involves the creation of new financial products and services by financial entities, which implies that the Central Bank of Reserve of El Salvador, in exercise of the powers granted to it, must authorize such financial products and services through an analysis procedure, promoting the development of an efficient, competitive, and solvent financial system. The regulatory authority of the Central Bank of Reserve of El Salvador is found in the Banking Law, the Cooperative Banks and Savings and Credit Societies Law, and the Organic Law of the Central Bank of Reserve of El Salvador, to authorize new active and passive credit operations and other financial services.

1.2. LEGAL BASIS
This Instruction is issued in accordance with the following legislation:
1.2.1. Article 3, letters e) and j), of the Organic Law of the Central Bank of Reserve of El Salvador.
1.2.2. Article 51, letter w), of the Banking Law.
1.2.3. Article 34, letter s) and Article 158, letter s), of the Cooperative Banks and Savings and Credit Societies Law.
1.2.4. Articles 72, 83, 86, 88, 89, 97, 89, 99, 111, 115, 116 and 117 of the Administrative Procedures Law.
1.2.5. Article 24 of the Law on Access to Public Information.
1.2.6. Article 10, Law Against Money Laundering and Asset Forfeiture.
1.2.7. Article 16, Instruction for the Prevention, Detection and Control of Money Laundering and Asset Forfeiture, Terrorism Financing and Financing of the Proliferation of Weapons of Mass Destruction.

1.3. SCOPE OF APPLICATION
The provisions contained in this Instruction shall be applied by the Central Bank of Reserve of El Salvador, Banks, Cooperative Banks, Savings and Credit Societies, and Federations of Cooperative Banks.

OBJECTIVE
Define the formal and general criteria and requirements for the approval process of new financial products and services that result in active and passive credit operations and other banking and financial services.
DEFINITIONS
3.1. Central Bank: Central Bank of Reserve of El Salvador.
3.2. Council: Board of Directors of the Central Bank of Reserve of El Salvador.
3.3. Department: Department of Public Policies and Financial Innovation.
3.4. Requesting Entity: Banks, Cooperative Banks, Savings and Credit Societies, and Federations of Cooperative Banks.
3.5. Management: Financial Stability and Public Policies Management.
3.6. Product or Service: New financial products or services that result in an active or passive credit operation or other banking and financial service, not provided by the Requesting Entity. This Product or Service is that referred to in Article 51 letter w) of the Banking Law and Articles 34 letter s) and 158 letter s), both of the Cooperative Banks and Savings and Credit Societies Law.
GENERAL RULES
4.1. The approvals granted by the Central Bank of Reserve of El Salvador may be of a general nature for all financial entities that comply with what is established in this Instruction.

4.2. It is the obligation of the Requesting Entity to comply with the delivery of the required documentation and the deadlines granted within the approval process of the new Product or Service.
4.3. It is the responsibility of the Management, through the Department, to carry out the technical analysis and evaluation of the requests, according to the deadlines granted within the approval process (Annex No. 1).
4.4. The deadlines established in this Instruction refer to business days for the Central Bank of Reserve, and shall be counted from the next business day.
4.5. The requests shall be resolved according to their degree of complexity, according to Annex No. 1. The deadlines shall begin to run from the next business day after the documentation referenced in section 5.1.2 is validated, and provided that it is complete, on which date the Department will communicate to the Requesting Entity.
4.6. It is the responsibility of the Legal Management to prepare the respective legal opinions regarding said requests, upon request of the Management, through the Department.
4.7. It is the responsibility of the Compliance Officer of the Central Bank of Reserve to prepare analyses of the risk of Money Laundering and Asset Forfeiture, Terrorism Financing and Financing of the Proliferation of Weapons of Mass Destruction, in order to be presented together for the approval of the Board of Directors of the Central Bank of Reserve.
4.8. It is the responsibility of the Department to request opinions from the Risk and Strategic Management Management, the Innovation and Technology of Innovation Management, the Payment Systems Surveillance Office, the Gender Unit, and other dependencies of the Central Bank, as it deems convenient, for the purposes of analysis of the new Product or Service.
4.9. The Resolution of the Board of Directors regarding the request for the new Product or Service shall be communicated to the Superintendency of the Financial System, for the purposes of its supervision processes.
4.10. The Management may extend the deadlines mentioned in Annex No. 1, when additional analysis of the content of the Product or Service is required. The extension of the deadline shall be communicated by the Management to the Requesting Entity, via email at politicaspublicas@bcr.gob.sv. To determine the duration of the extension, the Management must consider the maximum deadline to issue a final resolution established in Art. 89 of the Administrative Procedures Law.
4.11. The administrative procedure regulated in this Instruction must be concluded within a maximum period of nine months counted from its start, in accordance with Art. 89 of the Administrative Procedures Law.
4.12. The Department must warn the requesting entity, in the notification of the deadline enabled to correct observations, that, according to Article 117 of the Administrative Procedures Law, "after thirty days from the expiration of the deadline granted to address the requirement, expiration shall be declared."

SPECIFIC RULES
5.1 Request for New Financial Products and Services.
5.1.1 The authorization of new Products and Services may be initiated by the Requesting Entities or by the Central Bank.
5.1.2 When the authorization of new products and services originates from the initiative of a Requesting Entity, it must submit the request in physical form to the Presidency of the Central Bank and send a copy of the request in PDF and Microsoft Word formats to the email address politicaspublicas@bcr.gob.sv, which must contain the following:
5.1.2.1 Letter signed by the Official authorized for this purpose (Legal Representative or Attorney-in-fact of the Requesting Entity), including the reasons for requesting the approval of a new financial product or service and the name of a Contact from the Requesting Entity, their email address, and phone number. If the Requesting Entity considers it, it may state that the information submitted will be considered confidential, as stipulated in Art. 24 letter b) or d) of the Law on Access to Public Information.
5.1.2.2 Detailed list of the Law, Regulation, or other normative body that includes the description of the product, in the case where there is a Legal Basis,

Regulation or Minimum Guidelines, as established in section 5.2.1.

5.2 Documentation
5.2.1 When the authorization of new products or services originates from the initiative of a Requesting Entity (5.1.2.2), the request must include as an annex the following information, which may be recorded in the form of a Technical Document or Reference Standard for the new product or service, being the minimum elements that such documentation must contain, the following:
5.2.1.1 Introduction.
5.2.1.2 Definitions of the Terminology Used.
5.2.1.3 Requirements for clients.
5.2.1.4 Legal Basis on which the request for the new Product or Service is based, in the case where there is a Legal Basis, Regulation or Minimum Guidelines.
5.2.1.5 Description and main characteristics of the Product or Service: Name, concept, benefits for clients, functionalities, complementary services, aspects that differentiate it from others, varieties of the product, among others.
5.2.1.6 Target market segment to which it is directed.
5.2.1.7 Description of the Risks involved in adopting the new product or service, such as credit, counterparty, custody, liquidity, market, operational, cybersecurity, reputational, and the mechanisms, policies, or procedures to mitigate them (a risk matrix can be used).
5.2.1.8 Comprehensive analysis of the risk of Money Laundering and Asset Forfeiture, Terrorism Financing and Financing of the Proliferation of Weapons of Mass Destruction, according to the nature of the new product or service, applying international standards.
5.2.1.9 Security considerations in electronic equipment and platforms and others related to the protection of users of the new financial product or service.

5.2.1.10 Detail of the costs, charges, or commissions that users will incur when contracting the new Product or Service. All charges must be clearly identified in the contracts.
5.2.1.11 General Structure of the Contract, to know aspects related to agreed rights and obligations.
5.2.1.12 Description of the content or manner in which the Requesting Entity will provide financial education to the user about the acquired product.
5.2.1.13 Procedures, deadlines, and other rules for customer service regarding: inquiries made, attention and resolution of complaints, claims, among others.
5.2.2 The Management must attach the following documentation of the Financial Product or Service to the Presidency of the Central Bank, when the authorization of new products or services originates from the initiative of the Central Bank:
5.2.2.1 The reasons that justify promoting a new financial product or service.
5.2.2.2 Evidence of developments and experiences in other countries.
5.2.2.3 Legal Basis on which the new Product or Service is based.
5.2.2.4 The technical analysis and evaluation for its approval.
5.2.2.5 Description and main characteristics of the Product or Service.
5.2.2.6 Description of the Risks involved in adopting the new product or service such as credit, counterparty, custody, liquidity, market, operational, cybersecurity, reputational, Money Laundering and Asset Forfeiture risk, and Terrorism Financing and Financing of the Proliferation of Weapons of Mass Destruction and the mechanisms, policies, or procedures to mitigate them.
5.2.2.7 Security considerations in electronic equipment and platforms and others related to the protection of users of the new financial product or service.

5.3 Analysis of the Request
5.3.1 The Department will carry out the technical analysis and evaluation for the appropriateness or not of the approval of a new Product or Service, considering the opinions prepared by the Legal Management, the risk analysis of the Compliance Office, and if applicable, the opinions of other dependencies of the Central Bank, and governed by the following criteria:
5.3.1.1 Integral understanding of the Product or Service in question, its legal basis, and the risk it generates for financial entities, the banking system, or the financial system in general.
5.3.1.2 Legal Basis of the Product or Service, in the case where there is a Legal Basis, Regulation or Minimum Guidelines.
5.3.1.3 The impact of the authorization of the Product or Service on the Financial and Economic Sector, by presenting improvements, cost reduction, times, digitalization, innovation, and financial inclusion.
5.3.1.4 Potential benefits for users of the financial system.
5.3.1.5 The clarity, transparency, and ease of understanding of the Product or Service for the users to whom it is directed, in such a way that it facilitates the knowledge of the benefits, costs, and risks it entails and the information they must know.
5.3.1.6 Opportunity and convenience of offering the new Product or Service, in the sense that the functioning of the product and service, as well as the benefits they generate for the economy, are greater than the risks involved that they produce.

5.4 Request Analysis Procedure
5.4.1 The Central Bank, through the Department together with the Legal Management, the Compliance Office, or other dependencies of the Central Bank that intervene, will verify the information provided by the Requesting Entity (established in section 5.1.2), within a deadline according to Annex No. 1.
5.4.2 In case of missing documentation, the Department will send to the Requesting Entity a list of pending deliverables, and it will have a deadline of ten business days from the next day of the date of communication. The Requesting Entity may request an extension of the aforementioned deadline, which may not exceed five business days. If the missing documentation is not received, upon expiration of the deadline, what is established in Section 5.4.12.2 will apply. The Department will warn that, after thirty (30) days from the expiration of the deadline granted to address the requirement, without any action having been taken by the Requesting Entity, expiration will be declared.
5.4.3 Once the documentation is complete, the Department will communicate with the Contact of the Requesting Entity so that they send the documentation of 5.1.2 in Microsoft Word format via the email address politicaspublicas@bcr.gob.sv.
5.4.4 The Department will analyze the information and communicate to the Contact of the Requesting Entity, via email, the degree of complexity of the request as established in Annex No. 1.
5.4.5 The Central Bank of Reserve, through the Department, may request meetings with Officials of the Requesting Entity via the email address politicaspublicas@bcr.gob.sv.
5.4.6 The Department will inform the Management, the Legal Management, and the Compliance Office of the observations made from the analysis of the Product or Service, prior to sending the observations to the Requesting Entity.
5.4.7 The Department will send to the Requesting Entity the first observations within a maximum of 15 business days (as established in Annex No. 1), according to the degree of complexity, from having received all the information established in section 5.1.2. This deadline may be extended on a justified basis up to the maximum established for the referred analysis according to Annex 1, according to the complexity of the Product or Service. The extension deadline and its justification will be communicated by the Department via the email address politicaspublicas@bcr.gob.sv.
5.4.8 The Central Bank, through the Department via email, may request additional information from the Requesting Entity and/or resolve the observations that may arise, which must be responded to within a maximum prevention period of 10 business days (as established in Annex No. 1), counted from the date the Central Bank requires it. The Department will warn that, after thirty (30) days from the expiration of the deadline granted to

address the requirement, without any action having been taken by the Requesting Entity, expiration will be declared.
5.4.9 The prevention deadline may be extended before its expiration at the request of the Requesting Entity, for which it must issue a letter via email to the Department, duly justifying said request. This deadline will run from the next business day of the expiration date of the deadline being extended, and may not exceed 10 business days. The Department will warn that, after thirty (30) days from the expiration of the deadline granted to address the requirement, without any action having been taken by the Requesting Entity, expiration will be declared.
5.4.10 Upon receiving the corrected observations from the Requesting Entity, the Department will review that they have been corrected, according to the deadline stipulated in Annex No. 1.
5.4.11 The Department will inform the Contact of the physical documents and requirements that must be sent to the Management to present to the Board of Directors, in the case that the observations have been resolved to satisfaction.
5.4.12 Expiration of the procedure may be declared when:
5.4.12.1 The Requesting Entity has not corrected the observations within the deadlines established in sections 5.4.8 and 5.4.9.
5.4.12.2 It does not send the additional information requested by the Central Bank.
In both cases, 30 days must have elapsed from the expiration of the deadline granted, and the warning established in Art. 117 of the Administrative Procedures Law must have been indicated to proceed accordingly.
5.4.13 Expiration must be declared by the Board of Directors and must be communicated to the Requesting Entity (as established in Annex No. 2), notifying that the request is nullified, the file will be closed, and archived.
5.4.14 In the event of the declaration of expiration of the request, the Requesting Entity may submit a new request, starting the approval process again.

5.5 Conclusion of the Procedure (Approval or Denial)

BANCO CENTRAL
DE RESERVA DE EL
SALVADOR
INSTRUCTIVO PARA LA APROBACIÓN DE NUEVOS
PRODUCTOS Y SERVICIOS FINANCIEROS
DEPARTAMENTO DE
POLÍTICAS PÚBLICAS E
INNOVACIÓN
FINANCIERA
PÁGINA No.
10 de 14
CÓDIGO
980504
REVISADO
Gerencia de Estabilidad Financiera y Políticas Públicas APROBADO POR:
Sesión No. CD-11/2024, del 22 de abril de 2024

5.5.1 The Department will communicate to the Applicant Entity regarding the compliance with the observations, and will indicate that two original copies of the Technical Document or Reference Standard for the new product or service must be submitted within a period not exceeding five business days (as established in Annex No. 1). The Department will warn that, after thirty (30) days have passed from the deadline granted to address the requirement, without any action having been taken by the Applicant Entity, the request will be declared expired. The copies must meet the following requirements:

5.5.1.1 Contain the suggested changes incorporated into their text.
5.5.1.2 Present the copies on paper with the Entity's letterhead (or in color if none exists), printed double-sided.
5.5.1.3 Each page must bear the seal and signature of the Legal Representative or Attorney-in-Fact of the applicant entity.

5.5.2 The Department will prepare the documentation to submit it for approval by the Directing Council within the timeframe stipulated in Annex No. 1.

5.5.3 The Directing Council will deny the request, according to the following when:

5.5.3.1 The Management advises, based on the Department's opinion, that after the submission of the observations, the Applicant Entity has incorporated new elements, products, or modifications that change the nature of the request and were not part of the previous analysis performed.

5.5.3.2 When the missing documentation is submitted outside the timeframe established in Section 5.4.2 of this Instruction.

5.5.3.3 When the Applicant Entity corrects the observations after the deadline indicated in paragraph 5.4.8 or after the extension of the deadline for the precaution indicated in paragraph 5.4.9.

5.5.3.4 When the Applicant Entity submits the two original copies outside the timeframe indicated in paragraph 5.5.1.

5.5.4 When the applicant entity withdraws or renounces in writing to continue with the procedure, the Directing Council must rule in accordance with such requests.

BANCO CENTRAL
DE RESERVA DE EL
SALVADOR
INSTRUCTIVO PARA LA APROBACIÓN DE NUEVOS
PRODUCTOS Y SERVICIOS FINANCIEROS
DEPARTAMENTO DE
POLÍTICAS PÚBLICAS E
INNOVACIÓN
FINANCIERA
PÁGINA No.
11 de 14
CÓDIGO
980504
REVISADO
Gerencia de Estabilidad Financiera y Políticas Públicas APROBADO POR:
Sesión No. CD-11/2024, del 22 de abril de 2024

5.5.5 The Management will maintain a Registry of Approvals of Products and Services, in which the approved products and services are listed.

DECLARATION OF EXPIRATION OF REQUESTS

6.1. The Directing Council of the Central Bank may declare the expiration when, after the deadlines established in paragraphs 5.4.2, 5.4.8, 5.4.9, or 5.5.1 have ended, no action has been observed from the Applicant Entity.

NOTIFICATION TO THE ENTITY AND SUPERINTENDENCE OF THE FINANCIAL SYSTEM

7.1. The Secretary of the Directing Council, by means of letters sent via email and physically, will communicate to the Applicant Entity and to the Superintendence of the Financial System what was resolved by the Directing Council.

SPECIAL PROVISIONS

8.1. The operational aspects that arise in the execution of this Instruction will be resolved by the Presidency, upon proposal by the Management.

8.2. The aspects not contemplated in this Instruction will be resolved by the Directing Council.

8.3. Transitional Provision: Requests for New Financial Products and Services that are in process prior to the effective date of this Instruction will be resolved in accordance with the provisions contemplated in the version approved in Session No. CD-8/2022, of March 28, 2022.

VALIDITY, DISTRIBUTION AND DISSEMINATION

9.1. This Instruction will enter into force on April 23, 2024, and will repeal the version approved by the Directing Council in Session No. CD-8/2022 of March 28, 2022.

9.2. The Directing Council will keep a copy of the Instruction as backup for the Minutes of approval and will deliver the original to the Risk and Strategic Management Management. Likewise, it will deliver an electronic copy to the Department and authorize it to distribute electronic copies to the following Units:

Presidency

BANCO CENTRAL
DE RESERVA DE EL
SALVADOR
INSTRUCTIVO PARA LA APROBACIÓN DE NUEVOS
PRODUCTOS Y SERVICIOS FINANCIEROS
DEPARTAMENTO DE
POLÍTICAS PÚBLICAS E
INNOVACIÓN
FINANCIERA
PÁGINA No.
12 de 14
CÓDIGO
980504
REVISADO
Gerencia de Estabilidad Financiera y Políticas Públicas APROBADO POR:
Sesión No. CD-11/2024, del 22 de abril de 2024

Financial Stability and Public Policies Management
Legal Management
Compliance Office
Risk and Strategic Management Management

9.3. The Presidency of the Central Bank of Reserve is authorized to send a copy of this Instruction to the Applicant Entities, following the established distribution and sending control mechanisms.

9.4. The Financial Stability and Public Policies Management, through the Department, will disseminate this Instruction to the involved Units.

9.5. The Risk and Strategic Management Management is authorized to publish this Instruction in the Administrative Instruments System, for general consultation.

9.6. This Instruction will be published in its entirety on the website of the Central Bank of Reserve, for the knowledge of the general public.

BANCO CENTRAL
DE RESERVA DE EL
SALVADOR
INSTRUCTIVO PARA LA APROBACIÓN DE NUEVOS
PRODUCTOS Y SERVICIOS FINANCIEROS
DEPARTAMENTO DE
POLÍTICAS PÚBLICAS E
INNOVACIÓN
FINANCIERA
PÁGINA No.
13 de 14
CÓDIGO
980504
REVISADO
Gerencia de Estabilidad Financiera y Políticas Públicas APROBADO POR:
Sesión No. CD-11/2024, del 22 de abril de 2024

MODIFICATION CONTROL TABLE
N°
Revision
Previous Version
Approved Version
Approved and
Date

BANCO CENTRAL
DE RESERVA DE EL
SALVADOR
INSTRUCTIVO PARA LA APROBACIÓN DE NUEVOS
PRODUCTOS Y SERVICIOS FINANCIEROS
DEPARTAMENTO DE
POLÍTICAS PÚBLICAS E
INNOVACIÓN
FINANCIERA
PÁGINA No.
14 de 14
CÓDIGO
980504
REVISADO
Gerencia de Estabilidad Financiera y Políticas Públicas APROBADO POR:
Sesión No. CD-11/2024, del 22 de abril de 2024

Session No. CD-11/2024 of April 22, 2024
Annex No. 1
Code: 980504-01
CLASSIFICATION OF PRODUCT OR SERVICE BY DEGREE OF COMPLEXITY

Classification: Complexity 1

Change of corporate name or denomination of the Entity.
Modification to the Technical Document or Reference Standard of the Product or Service.
Change of the main characteristics of the Product or Service: functionalities, complementary services, product varieties, among others.
New Products or Services for the Applicant Entity, for which there is a Legal Basis, Regulatory or Minimum Guidelines.

Classification: Complexity 2

Adaptation to Legal Basis, Regulatory or New Guidelines that modify the characteristics of the Product or Service.
Incorporation of new aspects that are not clearly defined in the regulation.

Response Timeframe:
Complexity 1 Complexity 2
Activities Entity BCR Total Entity BCR Total
BCR receives the request with the required complete documentation Day 0 Day 0 BCR verifies the information and Assigns/Communicates complexity and response timeframe 1 BCR analyzes request and sends observations 10 10 15 15 Applicant Entity incorporates Observations 10 BCR validates Observations 3 3 5 5 Applicant Entity sends two original physical copies and attached documentation 5 BCR verifies the two original physical copies and attached documentation 2 BCR prepares final documents to present item to CD 2 2 5 5 Review and proposal to submit to approval of CD by GEFPP 2 Deadline for response: 15 20 35 15 30 45

Note: The timeframes will start from the day following the validation of the request with complete documentation. The timeframes stipulated in the table above (business days for the Central Bank, according to paragraph 4.4) do not include the extensions that the Applicant Entity or the Central Bank require, nor the timeframes for incorporation and validation of observations, nor the period to complete physical documentation by the Applicant Entity (Sections 5.4.7 and 5.4.9). The Management will submit the request to the approval process of the Directing Council, subsequently the Central Bank of Reserve of El Salvador will communicate to the Entity the resolution taken.

Session No. CD-11/2024 of April 22, 2024
Annex No. 2
Code: 980504-01
Format for Note of Denied Request

San Salvador, ____ of _____ of 20__.
Licensed Professional
Name of Legal Representative or Attorney-in-Fact Applicant Entity _______.

By virtue of the analysis performed on the Request related to __________________________________, which was sent to us by your entity on date ____ of _____ of 20, and based on what is established in paragraphs 5.4.2, 5.4.8, 5.4.9 and 5.5.1 of the "Instruction for the Approval of New Financial Products and Services" of the Central Bank of Reserve of El Salvador, we communicate to you that:

Therefore, we inform you that, if you wish to obtain the approval of the Central Bank of Reserve of El Salvador, you must submit a new request to initiate the approval process.

Sincerely,
Licensed Professional__________________________________ Financial Stability and Public Policies Management

Lineage: No known changes