Norm for the Transformation of a Financial Company into a Bank

Resolution CD-SIBOIF-505-1-OCTU24-2007
Dated October 24, 2007

NORM FOR THE TRANSFORMATION OF A FINANCIAL COMPANY INTO A BANK

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

CONSIDERING

I
That Financial Companies as Non-Bank Financial Institutions are subject to the Single Chapter of Title IV of Law 561, the General Law of Banks, Non-Bank Financial Institutions and Financial Groups (General Law of Banks);

II
That Article 132 of the General Law of Banks establishes that Non-Bank Financial Institutions must obtain their authorization to function as such institutions, in accordance with what is provided in Chapter I of Title II of said Law;

III
That Article 16 of Chapter I of Title II of the General Law of Banks establishes that any reform to the Deed of Constitution and Bylaws of the Financial Institutions requires the prior authorization of the Superintendent of Banks and Other Financial Institutions;

IV
That the last paragraph of Article 10 of Law 316, the Law of the Superintendence of Banks and Other Financial Institutions and its reforms, laws 552 and 564 (Law of the Superintendence), states that the Board of Directors may carry out all those general regulatory activities compatible with the object of that Law;

V
That, based on the legal provisions stated above, it is necessary to establish the requirements and procedures for the transformation into a Bank of a Financial Company;

In exercise of its powers,

HAS ISSUED

The following,

NORM FOR THE TRANSFORMATION OF A FINANCIAL COMPANY INTO A BANK Resolution CD-SIBOIF-505-1-OCTU24-2007

CHAPTER I
CONCEPTS, OBJECT AND SCOPE

Art. 1. Concepts.- For the purposes of application of the provisions contained in this regulation, the terms indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a. General Law of Banks: Law 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups. b. Superintendence: Superintendence of Banks and Other Financial Institutions.
c. Superintendent: Superintendent of Banks and Other Financial Institutions.

Art. 2.- Object and scope.- This regulation aims to establish the requirements and procedures for the transformation into a Bank of an authorized Financial Company, supervised, monitored and audited by the Superintendence.

CHAPTER II
SUBMISSION OF APPLICATION AND AUTHORIZATION FOR TRANSFORMATION

Art. 3.- Submission of Application for Transformation.- The Financial Company interested in transforming into a Bank must submit to the Superintendent, an application accompanied by the following documentation:

a) Certification of the Minutes of the General Shareholders' Meeting in which it is resolved:
1) The transformation into a bank;
2) The reforms to the Social Deed of Constitution and Bylaws, which must include the increase in authorized social capital and the inclusion of the word Bank in the corporate name;
3) Request the Board of Directors for approval of the transformation; and,
4) Request the Superintendent for approval of the reforms to the Social Pact and Bylaws.

b) Comply with the requirements established in numbers 2 to 7 of Article 4 of the General Law of Banks, which are regulated by the regulations on the constitution of banks and financial companies.
The Superintendent may authorize exceptions to the submission of some or all of the information requirements indicated in the preceding paragraph when this information is already available and updated in the Superintendence's files. The Superintendent may request complementary or additional information that it considers pertinent from the applicant financial company.

Art. 4.- Authorization for the transformation of the company.- Once the study of the application by the Superintendent is concluded and the opinion of the Central Bank of Nicaragua is issued, if applicable, the Superintendent will submit the application to the consideration of the Board of Directors, which will resolve the transformation application within a period not exceeding one hundred and twenty days following the date on which the applicant institution has presented all the required information in accordance with the previous article.

If the decision is favorable, the Board of Directors will issue a resolution of authorization for the Financial Company to transform into a Bank.
Such resolution must be published in the Official Journal, La Gaceta, by the applicant company.

CHAPTER III
REQUIREMENTS TO BEGIN ACTIVITIES

Art. 5.- Submission of Application to Operate. The institution that has received the authorization referred to in the preceding articles must submit an application to the Superintendent to begin its operations as a Bank, accompanied by the following documentation:

a) Testimony of the public deed of protocolization of the Certification of the Minutes of the General Shareholders' Meeting related in item a) of Article 3 of this regulation with the corresponding registration reasons in the Second Book of Companies of the respective Public Mercantile Registry. For the purposes of identification of the new banking institution, such public deed of protocolization will be called “TRANSFORMATION INTO A BANK OF (here the current name of the financial company)”. Likewise, the resolution of the Board of Directors by virtue of which the transformation of the Financial Company into a Bank was authorized must be incorporated; for this purpose, the authorizing notary must insert the entire resolution in the deed and mention the editions of the Official Journal, La Gaceta, in which they were published.

b) Operational procedure manuals and other documents that will be used in the new operations that the banking institution will offer to the public in accordance with the regulations in this matter.

c) Support documents demonstrating that the amount required to complete the minimum social capital is in accordance with what is established in Article 8 of this regulation.

The Superintendent may request the applicant entity, the complementary or additional information that it considers pertinent.
If the application for authorization to operate with evidence of compliance with the requirements mentioned in this article is not submitted within one hundred and eighty days counted from the notification of the resolution of authorization for the transformation, it will become void, and the amount of the deposit referred to in number 5, of Article 4 of the General Law of Banks, will be paid to the treasury of the Republic.

Art. 6. Superintendent's Authorization to Operate.- The Superintendent will resolve the application to operate, within fifteen days following the date on which the applicant entity has presented all the required information in accordance with Article 5 of this regulation, otherwise, it will communicate to the interested parties the deficiencies noted so that they fill in the omitted requirements, and once the deficiency is remedied, it will grant the authorization to operate within a term of five days following the date of correction.

If the decision is favorable, the Superintendent will issue a resolution of authorization for the Society transformed into a Bank to operate as such. Such resolution must be published in the Official Journal, La Gaceta, by the applicant company. Likewise, such resolution must be registered in the Second Book of Companies of the respective Public Mercantile Registry.

CHAPTER IV
OTHER PROVISIONS AND EFFECTIVE DATE

Art. 7. Reports to the Board of Directors.- The Superintendent's authorization must be communicated to the Board of Directors and to it the Superintendent will render a special report in case of denial of the application, explaining the causes that motivated the denial decision.

Art. 8. Minimum social capital.- To complete the minimum social capital required, the applicant entity may do so as follows:

a) Capitalization of profits from previous periods duly audited and complying with what is established in the Norm for the Distribution of Profits of Financial Institutions issued by the Board of Directors;

b) Non-capitalized equity contributions made in cash whose destination has been to increase the social capital;

c) New capital contributions in cash. For this effect, for each of the shareholders, documentary evidence to the satisfaction of the Superintendent of the origin of the equity to be invested is required, which must at minimum include:
1) Information on the bank accounts from which the money comes;
2) Information on the origin of the money deposited in said accounts; and
3) Information on the origin of the equity (information on the activities from which the equity comes such as businesses, inheritances, donations, etc.) and evidence that the money comes from the same (financial statements, wills, etc.).

Art. 9. Repeal.- Resolution CD-SIBOIF-346-MAR16-2005, of March 16, 2005, published in La Gaceta, Official Journal No. 72, of April 14, 2005, is repealed.

Art. 10. Effectiveness.- This regulation will enter into force from its publication in the Official Journal, La Gaceta.

(f) Antenor Rosales B. (f) V. Urcuyo V. (f) A. Cuadra G. (f) Roberto Solórzano Ch. (f) Gabriel Pasos Lacayo (f) Antonio Morgan Pérez. Ad Hoc Secretary.

URIEL CERNA BARQUERO
Secretary of the Board of Directors SIBOIF