Superintendency of Banks and Other Financial Institutions

REPUBLIC OF NICARAGUA - CENTRAL AMERICA

Resolution No. CD-SIBOIF-612-2-ENE27-2010
Dated 27 January 2010

NORM AMENDING ARTICLES 4 AND 11 AND ANNEX 1 OF THE CAPITAL ADEQUACY NORM

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

WHEREAS

I

That it is necessary to regulate the provisions established in Articles 19 and 20 of Law No. 561, General Law on Banks, Non-Bank Financial Institutions and Financial Groups, regarding the minimum required capital and credit risk and notional assets.

II

That Article 10 of Law 316, Law of the Superintendency of Banks and Other Financial Institutions, and its amendment contained in Law 552, Law of Amendments to the aforementioned Law 316, empowers the Board of Directors of the Superintendency to issue the norms and provisions necessary for compliance with the aforementioned laws;

In the exercise of its powers,

HAS ISSUED

The following:

Resolution No. CD-SIBOIF-612-2-ENE27-2010 NORM AMENDING ARTICLES 4 AND 11 AND ANNEX 1 OF THE CAPITAL ADEQUACY NORM

First: Articles 4 and 11 of the Capital Adequacy Norm contained in Resolution No. CD-SIBOIF-504-2-OCTU19-2007 are hereby amended, which shall read as follows:

Managua, Nicaragua

SIBOIF Building - Km. 7 South Highway

PBX Telephone: 2265-1555 P.O. Box 788

web: www.siboif.gob.ni

Email: correo@siboif.gob.ni

Art. 4 Components of Secondary Capital.- Secondary capital shall be composed of the following:

A. Donations and other non-capitalizable contributions that meet the following characteristics:

1) Available to cover losses of the financial institution;

2) With prior authorization from the Superintendent in case repayment conditions exist;

3) In case repayment conditions exist, these may not be made effective within the first five years.

B. Revaluation Adjustments of Assets (Fixed Assets);

C. Other Equity Reserves;

D. Accumulated Results from Prior Periods that do not qualify as primary capital;

E. Results of the Current Period;

F. Cumulative preferred shares and other hybrid capital instruments that meet the following characteristics:

1) Unsecured (not guaranteed), subordinated and fully paid;

2) Of a permanent nature (without maturity), or with maturity with a mandatory conversion clause to ordinary capital;

3) Not redeemable at the holder's option or redeemable with prior authorization from the Superintendent;

4) Available to cover losses of the financial institution;

5) When the instrument contains a mandatory yield payment clause, it shall allow its deferral in case the financial institution's profitability does not allow its payment.

G. Term subordinated debt and limited-life redeemable preferred shares that meet the following characteristics:

1) Unsecured (not guaranteed), subordinated and fully paid;
2) With original maturity terms of more than five years;
3) Not mandatorily convertible to ordinary capital;

The instruments referred to in this letter may not exceed fifty percent of primary capital. Likewise, during the last five years prior to the maturity of said instruments, only the following percentages may be recognized as part of secondary capital:

Maturity	Percentages
Fifth year before maturity	80%
Fourth year before maturity	60%
Third year before maturity	40%
Second year before maturity	20%
Last year before maturity	0%

H. General Provisions: Refers to credit provisions constituted voluntarily by the financial institution to cover unidentified losses. For purposes of calculating secondary capital, these general provisions may not exceed 1.25% of total credit risk-weighted assets.

In accordance with Article 20 of the General Law on Banks, secondary capital may not exceed one hundred percent of primary capital.

Art. 11 Transitional.- The line item corresponding to asset revaluation adjustments referred to in letter B of Article 4 of this norm shall not be taken into account as a component of secondary capital, until the Board of Directors of the Superintendency issues a norm regulating this matter.

Second: Annex 1 and its instructions of the Capital Adequacy Norm contained in Resolution No. CD-SIBOIF-504-2-OCTU19-2007 are hereby amended, which shall read as follows:

Annex 1

INSTITUTION: CAPITAL ADEQUACY CALCULATION (In thousands of córdobas)

CONCEPTS	Jan-00
I. TOTAL RISK ASSETS (A+B-C-D)	0.0
A. Weighted Risk Assets	0.0
Cash and Cash Equivalents	0.0
Investments in Net Securities	0.0
Net Securities and Derivatives Transactions	0.0
Net Credit Portfolio	0.0
Other Net Accounts Receivable	0.0
Net Property, Plant and Equipment	0.0
Net Assets Received in Credit Recovery	0.0
Net Permanent Equity Investments	0.0
Other Net Assets	0.0
Net Contingent Accounts	0.0
B. Notional Assets for Exchange Rate Risk	0.0
C. Less: Pending Adjustments to be Constituted	0.0
	0.0
D. Less: Investments in Capital Instruments	0.0
II. MINIMUM REQUIRED CAPITAL	0.0
(10% of Total Risk Assets) 1/
III. CAPITAL ADEQUACY BASE (A+B-C-D-E)	0.00
A. Primary Capital	0.00
1. Paid-in Share Capital	0.0
2. Donated Capital	0.0
3. Premiums on the Placement of Shares	0.0
4. Contributions for Capital Increases	0.0
5. Adjustments for Minority Interest in Other Companies	0.0
6. Legal Reserve	0.0
7. Accumulated Results from Prior Years	0.0
B. Secondary Capital	0.00
1. Non-capitalizable Donations	0.0
2. Adjustments for Asset Revaluation	0.0
For Revaluation of Assets	0.0
	0.0
3. Other Equity Reserves	0.0
4. Accumulated Results of Prior Years	0.0
5. Results of the Period	0.0
6. Cumulative Preferred Shares or Other Hybrid Instruments	0.0
7. Subordinated Debentures and Redeemable Preferred Shares	0.0
8. General Provisions	0.0
C. Less Excess (Primary Capital - Secondary Capital)	0.0
D. Less: Adjustments Pending to be Constituted	0.0
1) Provisions	0.0
2) Other adjustments	0.0
E. Less: Investments in Capital Instruments	0.0
1)	0.0
2)	0.0
IV. CAPITAL ADEQUACY (III / I)	#¡DIV/0!

[1/] As established by the General Banking Law in its article 19.

In roman numeral III, points D and E, the amount of the adjustments pending to be constituted and of the investments in capital instruments must be indicated with a negative sign.

Prepared by :
Authorized by :

Instructions for filling out Annex 1
CALCULATION OF CAPITAL ADEQUACY

Institution: Name of the reporting bank or financial institution.
In thousands of córdobas: In the Annex, the figures must be expressed in thousands of córdobas.
Month/Year:
The month and year to which the report corresponds, example: Dec-2007

I. TOTAL RISK ASSETS (A + B - C - D)

As observed in Annex 1, it refers to the sum of: A. Weighted Risk Assets plus B. Notional Foreign Exchange Risk Assets; minus: C. Adjustments Pending to be Constituted and D. Investments in Capital Instruments, described below.

A. Weighted Risk Assets. Corresponds to the sum of the weighted balances of the following items that come from Annex 2: cash and cash equivalents, investments, loan portfolio, interest and commissions receivable, other accounts receivable, property, plant and equipment, other assets and contingent accounts.

B. Notional Foreign Exchange Risk Assets. Here the amount corresponding to the result of the calculation of said amount carried out in Annex 3 must be noted, as established by article 9 of the Capital Adequacy Standard, hereinafter referred to as "the standard".

C. Adjustments Pending to be Constituted. Refers to the sum of: provisions pending to be constituted for loan portfolio, interest to be written off, provisions for assigned assets and write-off of various accounts.

D. Investments in Capital Instruments. Corresponds to the total of investments in capital instruments as established by article 5, literal B, of the Standard.

II. MINIMUM REQUIRED CAPITAL. Refers to the amount resulting from calculating 10% of the "Total Risk Assets".

III. CAPITAL ADEQUACY BASE (A + B - C - D - E). Corresponds to the sum of A. Primary

Capital plus B. Secondary Capital; minus: C. Excess (Primary Capital – Secondary Capital), D. Adjustments Pending to be Constituted and E. Investments in Capital Instruments, described below.

A. Primary Capital. Refers to the sum of the following items: paid-in capital, donated capital, share placement premiums, capital contributions pending capitalization, adjustments for minority participation in other companies, legal reserve, accumulated results of prior years and

results of the period. All these items in accordance with the definitions contained in article 3 of this standard.

In accordance with the aforementioned article, the book value of purchased goodwill derived from mergers or acquisitions of institutions, both those assigned to fixed assets and those not assigned (recorded in deferred charges), shall be deducted from the sum of the core capital components.

B. Secondary Capital. It corresponds to the sum of the following items of this annex: non-capitalizable donations, asset revaluation adjustments, other equity reserves, accumulated results from previous years, results for the period, cumulative preferred shares or other hybrid instruments, subordinated obligations and redeemable preferred shares; and generic provisions.

1. Non-Capitalizable Donations. It refers to donations and other non-capitalizable contributions that comply with the characteristics established in article 4, literal A. of this standard.

2. Asset Revaluation Adjustments. It corresponds to asset revaluation adjustments (Fixed Assets), which in accordance with article 11 of this standard shall not be taken into account as components of secondary capital while the Board of Directors of the Superintendency does not issue regulations governing this matter.

3. Other Equity Reserves. It concerns any other equity reserves constituted by the institution.

4. Accumulated Results from Previous Years. It refers to accumulated results from previous periods that do not qualify as core capital.

5. Results for the Period. It corresponds to the result for the period elapsed up to the report date.

6. Cumulative Preferred Shares and Other Hybrid Instruments. It concerns cumulative preferred shares and other hybrid instruments that comply with the characteristics established in article 4, literal F. of this standard.

7. Subordinated Obligations and Redeemable Preferred Shares. It refers to term subordinated debt and redeemable preferred shares of limited life that comply with the characteristics established in article 4, literal G. of the Standard.

The instruments referred to in literal G. may not exceed fifty percent of core capital. Likewise, during the last five years prior to the maturity of said

instruments, only the percentages of the
table contained in article 4, literal G of the Standard may be recognized as part of secondary capital.

8. Generic Provisions. It corresponds to credit provisions constituted voluntarily by the financial institution to cover unidentified losses. These generic provisions may not exceed 1.25% of the total risk-weighted assets.

C. Less Excess (Core Capital - Secondary Capital). In accordance with article 20 of the General Banking Law, secondary capital may not exceed one hundred percent of core capital; consequently, any excess over core capital must be subtracted.

D. Less: Pending Adjustments to be Constituted. The provisions and other adjustments that the institution has pending to constitute must be detailed and subtracted from the sum of core and secondary capital.

E. Less: Investments in Capital Instruments. The amount of investments in capital instruments that the institution has in each of its Subsidiaries must be detailed and subtracted.

IV. CAPITAL ADEQUACY ( III / I)

It corresponds to the result of dividing: III. CAPITAL ADEQUACY BASE by I. TOTAL RISK ASSETS.

Third: This standard shall enter into force upon its notification, without prejudice to its publication in the Official Gazette, La Gaceta. (f) Antenor Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Fausto Reyes (f) illegible (Silvio M. Casco Marenco) (f) U. Cerna B. Secretary.

URIEL CERNA BARQUERO
Secretary Board of Directors SIBOIF