Norm on Conflicts of Interest and Code of Conduct for Staff of the Superintendence of Banks and Other Officials Appointed by the Superintendent

Norm on Conflicts of Interest and Code of Conduct for the Staff of the Superintendence of Banks and Other Officials Appointed by the Superintendent Superintendence of Banks and Other Financial Institutions – Nicaragua 1 PROJECT OF NORM ON CONFLICTS OF INTEREST AND CODE OF CONDUCT FOR THE STAFF OF THE SIB AND OTHER APPOINTMENTS BY THE SUPERINTENDENT

The Board of Directors of the Superintendence of Banks and Other Financial Institutions, issues the regulation in accordance with the following terms,

CONSIDERING I That it is convenient to create some preventive rules that seek to avoid bad official conduct or possible situations of conflict of interest in the designation of some people in key positions, such as superintendents, administrators of intervened banks, or liquidators. II That the independence of officials with respect to the supervised, administered, or liquidated institutions must be sought, both in the exercise of their functions and after they leave office. III That it must be ensured that officials maintain the secrecy, confidentiality, or reserve that corresponds in accordance with the Law, both in the exercise of their functions and after they leave their positions. IV That it is convenient to establish some rules that guarantee that officials who migrate from the Superintendence to the banking system and also those who arrive at the Superintendence from banks, have independent and reserved behavior. V That it is convenient to fix some conditions through which certain senior executives who had participated in the administration of a financial institution that later becomes insolvent and is intervened or declared in liquidation, can subsequently assume positions as members of the respective Intervention or Liquidation Boards, without giving cause to the presumption of conflicts of interest.

The Board of Directors after the considerations, RESOLVES CD-SIBOIF-209-1-JUL4-2002 Approve the following

Norm on Conflicts of Interest and Code of Conduct for the Staff of the Superintendence of Banks and Other Officials Appointed by the Superintendent Superintendence of Banks and Other Financial Institutions – Nicaragua 2 NORM ON CONFLICTS OF INTEREST AND CODE OF CONDUCT FOR THE STAFF OF THE SUPERINTENDENCE OF BANKS AND OTHER OFFICIALS APPOINTED BY THE SUPERINTENDENT (CD-SIBOIF-209-1-JUL4-2002)

Art. 1 Purposes This Norm has the following purposes:

1. To promote public confidence in the integrity of the Superintendent and other officials and employees of the Superintendence or appointed by the Superintendent, by minimizing the possibility that conflicts arise between private interests and duties to the public interest of all those to whom this Norm applies, as well as to provide a resolution of such conflicts, if they occur, that is timely and in the public interest.
2. To encourage the participation of experienced and competent people as public servants, by establishing clear rules of conduct regarding conflict of interest for officials and employees of the Superintendence, both during and after serving as such.

Art. 2 Basic principles of conduct In order to ensure the highest level of integrity and transparency in the fulfillment of the mandate of the Superintendence, the Superintendent, and each official or employee of the Superintendence in their respective scope, are responsible for taking the actions that are necessary to avoid real, potential, or apparent conflicts of interest.

In particular, each official or employee must adhere to the following Principles:

1. Act with honesty and transparency, in accordance with the highest ethical standards, in such a way that public confidence in the integrity, objectivity, and impartiality of the Superintendence is maintained and increased;
2. Seek to act in such a way that one can be subjected to the strictest public scrutiny, an obligation that is not fully fulfilled by merely acting within the law;
3. Not have private interests in relation to supervised entities, other than those normal for any of their clients and within what is established in the Law and in this Norm, which may be affected particularly or significantly by supervisory actions or other official actions in which the official or employee participates;
4. At the time of appointment or hiring and subsequently, arrange personal affairs in such a way as to avoid real, potential, or apparent conflicts of interest; but, if such conflicts arise despite everything between their private interests and their official duties and responsibilities, resolve said conflicts in a timely manner and in the public interest;
5. Not request or accept from supervised entities transfers of economic benefit, other than incidental gifts, customary hospitality, or other benefits of nominal value—all of this in accordance with the Law and what is established in this Norm—unless the transfer corresponds to an enforceable contract or property right of the official or employee;
6. Not exceed their official function to help entities or private persons in their dealings with the Superintendence, with supervised entities, or with other State entities, if this were to result in preferential treatment to any person;
7. Not take advantage of or benefit consciously from information obtained in the course of their official duties and responsibilities that is not available to the general public;
8. Not use directly or indirectly, or allow the use of, goods of any type from the Institution, except for officially approved purposes;
9. Not act, after leaving work for the Institution, in a way that inappropriately takes advantage of their previous position; and
10. Maintain strict confidentiality regarding information related to entities supervised by this Superintendence, and discuss such matters only with those persons within the Institution who need to know said information. The obligation to ensure whether a person needs to know such information rests with the official or employee who reveals it. This obligation will be considered fulfilled if the official or employee has obtained the corresponding authorization from their superior.

Art. 3 Reports and corrective measures

1. Once a year, no later than April 30, each official or employee of the Superintendence must deliver to the Superintendent a confidential report on any assets or interests in assets, as well as any agreements or relationships, that result in a real, perceived, or potential conflict of interest, in accordance with Principle No. 3 of Article 2, including assets or interests that, according to the knowledge or opinion of the official or employee, belong directly or indirectly to their immediate family members (spouse, parents, children). Likewise, they must report on the actions taken or to be taken to resolve said conflict of interest.
2. Without prejudice to the annual report contemplated in the preceding paragraph, officials and employees of the Superintendence must immediately inform the Superintendent of any change in their assets or interests in assets, which could lead to a real or perceived conflict of interest, as well as on the actions taken or to be taken to resolve said conflict of interest.
3. Based on the reports contemplated in the two preceding paragraphs, the Superintendent, or a committee designated by him, will determine the additional corrective measures necessary to resolve the conflict of interest, including the possible resignation or removal from office of the affected official or employee. Against this resolution, a request for reconsideration may be filed before the Superintendent.
4. The Superintendent must present the reports referred to in paragraphs 2 and 3 of this Article to the Board of Directors of the Superintendence.

Art. 4 Credits, sales, and gifts in relation to supervised entities The provisions established in Art. 27 of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, are regulated as follows:

1. Officials and employees of the Superintendence of Banks must obtain prior written permission from the Superintendent to carry out or contract any of the following operations in relation to any entity subject to the supervision of this Superintendence: a) The request or obtaining of credit in any form, from such entities; b) The acquisition of goods of any nature, from such entities, including both physical goods and financial assets other than deposit operations in the same entity; and c) The sale of goods or services of any nature to such entities.
2. When it is the Superintendent who wants to carry out or contract any of the operations referred to in the preceding paragraph, they must previously obtain the corresponding written authorization from the Board of Directors of the Superintendence.
3. In the request for authorization for any of the operations contemplated in the two preceding paragraphs, the interested party must declare that they are not receiving significantly more favorable treatment than other people in equal conditions, presenting the relevant information.
4. Within 60 days counted from the approval of this Norm, a written declaration of existing operations subject to authorization, contracted prior to the approval of this norm, must be obtained from each official or employee. A similar declaration must be obtained at the time of hiring any new official or employee.
5. No official or employee of the Superintendence may receive, directly or indirectly, from a supervised entity or its directors, executives, or employees, as a gift or without justified consideration, any cash money, securities, or other financial instruments. This prohibition includes receiving interest rates or yields on deposits, significantly more favorable than other clients of the same entity in equal conditions.
6. Nor may any official or employee of the Superintendence receive, directly or indirectly, from a supervised entity or its related parties, or its directors, executives, employees, or agents, as a gift or without justified consideration, any object, service provision, or other benefit in kind, whose value is such that it could influence the official or employee receiving them, in their judgment or in the exercise of their duties and responsibilities as a member of the staff of this Institution. The application of this prohibition will be governed by the following rules: a) All gifts, hospitality, and other benefits in kind received by a person from the same entity supervised by the Superintendence that, individually or cumulatively over the same calendar year, exceed a value equivalent to US$100.00, must be declared in writing, by the official or employee who has received them, to the Superintendent or to the person to whom he delegates, who will judge if they are within what is correct and if they should be returned or not. b) Without prejudice to the obligation to declare established in the preceding letter, the acceptance of gifts, hospitality, and other benefits in kind, received from the same supervised entity in excess of the limit established in said letter, may be admitted as correct, provided that such gifts, hospitality, and benefits meet all the following conditions: (i) they are within the limits of what is correct, as a normal expression of courtesy, protocol, or hospitality; (ii) they do not lend themselves to arousing suspicion about the objectivity of the official or employee receiving them; (iii) they do not compromise the integrity of the Superintendence; and (iv) in the case of gifted objects, their accumulated value in a month does not exceed 5% of the monthly salary of the one who receives them or US$100.00, whichever is lower.
7. All prohibitions and restrictions contemplated in the preceding paragraphs will apply, not only to the staff of the Superintendence, but also, by extension, to their spouses and their children under 21 years of age.

Art. 5 Obligation of secrecy of Superintendence officials Without prejudice to what is established in Art. 30 of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, said provision is interpreted and regulated in the following aspects:

1. The obligation of secrecy established by the mentioned Article with respect to information obtained by officials and agents of the Superintendence in the exercise of their functions must be understood in the sense that said obligation persists even after they cease in their positions, and that the expression “in the performance of their functions” refers to the moment of acquisition of the information, but that its misuse or dissemination can occur at a later time.
2. Therefore, every official or employee of the Superintendence must sign a declaration in which they commit: (i) to strictly keep said secrecy, both during the exercise of their position in the Superintendence and, for an indefinite period, once they stop working in this Institution; and (ii) not to make improper use of said privileged information for their own benefit or for that of associates or related parties, nor to the detriment of third parties.
3. In any case where a violation of said secrecy is proven, or there is a reasonably substantiated suspicion of the same, the Superintendent must proceed to inform the Public Ministry.
4. To minimize the risks of information leakage, the Superintendent may issue the internal regulation of Principle No. 10 of Article 2 of this Norm, in order to avoid that those officials or employees who do not have a legitimate interest in knowing them have access to information of different categories.

Art. 6 Rules to avoid conflict of interest in the hiring of officials or employees from supervised entities or with interests in them

1. In the case of Superintendents, area directors, and any official or employee with supervisory functions over the entities supervised by the Superintendence, it must be verified that, at the time of their appointment or hiring and during the exercise of their positions, they meet the following conditions: a) That they are not directors, officials, employees, owners, or shareholders of any of the institutions subject to the surveillance of the Superintendence; b) That they are not delinquent debtors of any banking or financial institution; c) That they have not been sanctioned in accordance with the Organic Law of the Comptroller General of the Republic prior to their appointment or hiring; d) That they have presented a notarial declaration in the sense that they do not incur or do not intend to incur any of the causes of ineligibility contemplated in the preceding subparagraphs and in the following paragraph; and e) That, in the case of Superintendents, they have also presented a notarial declaration in the sense that they do not incur or do not intend to incur any of the causes of ineligibility contemplated for that position in the Law of the Superintendence of Banks and Other Financial Institutions.
2. In the case of any official or employee of the Superintendence, including those mentioned in the preceding paragraph, it must be verified that, at the time of their appointment or hiring and during the exercise of their position, they meet the following conditions: a) That they are not a director, official, or employee of any of the institutions subject to the surveillance of the Superintendence; b) That they do not have delinquent debts, protests of documents, or bad antecedents of financial or criminal behavior; c) That, in the case of having worked in a supervised entity, they do not have long-term remuneration arrangements with it that imply a conflict of interest (pending participation bonuses or stock options, for example); d) That they have declared any preexisting debt contracted with any financial institution, and that its amount, in the judgment of the Superintendent, is amortizable over time agreed upon according to projected family income; e) That they have impeccable probity in the administration of business; f) That they do not possess, or have not possessed in the last 12 months, significant participations (greater than 5% of social capital) in the ownership of entities supervised by the Superintendence of Banks, either personally or indirectly through family members (first two degrees of consanguinity or affinity) or through companies in which they have dominant participation.
3. When hiring as an official or employee of the Superintendence a person who comes from having direct executive or managerial responsibilities in a supervised entity, in addition to the previous verifications, it must be avoided that they have direct supervisory functions (on-site inspection, preparation of inspection reports or analysis, or decision-making) on the entity from which they come during the 12 months following their appointment or hiring.

Art. 7 Rules to avoid conflict of interest in the appointment of administrators of intervened banks and liquidators Administrators and Liquidators, or members of Administrative or Liquidation Boards, must meet the following minimum requirements:

1. Not be subject to the impediments contemplated for members of Boards of Directors in the General Banks Law (Art. 30);
2. Possess a professional title at least at the master's level and five years or more of experience, in the legal, economic, administrative, or financial area, or in its absence, have experience in banking or business management not less than 10 years; without prejudice to the appointment of the lawyer, referred to in article 92 of the banking law.
3. Present an impeccable situation of probity in the administration of business and, more specifically, not have participated in the last 15 years in a relevant manner in the management or ownership, in Nicaragua or abroad, of banking or capital market entities that have been declared bankrupt, intervened, or in forced liquidation (except in the case of early voluntary liquidation), or whose continuity has been possible only with the assistance of resources from the relevant fiscal, monetary, or regulatory authorities (except what is provided in the following paragraph 5), if such events have occurred during their management or status as shareholder, or within three years following the cessation of the same;
4. Not possess direct or indirect participation in the ownership of the failed institution;
5. Not have been part of the senior management (director or general manager) of the failed institution except when all the following conditions are met: a) That their tenure in the position at the time of intervention has a seniority not exceeding 12 months; b) That, at the time of their appointment as general manager by the Board of Directors of the failed entity, the Superintendence has antecedents or inspection reports indicating that said financial institution already presented weaknesses in solvency, liquidity, or management; c) That, during the last 12 months or less that the entity was under their charge, irregular credits were not granted nor contracts were celebrated that were objected to by the Superintendence or external auditors or that have aggravated the situation of the banking entity; d) That there is evidence, in the judgment of the Superintendent, of the independence of the person with respect to the shareholders of the entity; and e) That prior to their appointment in the Administration or Liquidation Board, the Superintendent has informed the Board of Directors of the Superintendence

Norm on Conflicts of Interest and Code of Conduct for Personnel of the Superintendence of Banks and Other Officials Appointed by the Superintendent Superintendence of Banks and Other Financial Institutions – Nicaragua 9 that the person concerned has shown notable collaboration with the Superintendence that has proven decisive, either to determine the real financial and solvency situation of the entity to be intervened or liquidated, or to take preventive or corrective measures. Art. 8 1Once the Superintendent of Banks is aware of the situation of non-compliance with credit obligations by officials and employees of the Superintendence of Banks with respect to financial entities under supervision and oversight, it shall be prohibited for them to participate in inspections carried out in those companies with which they maintain the aforementioned situation. Without prejudice to the foregoing, the Superintendent of Banks may analyze and resolve each case individually, granting the respective employee or official, according to the results of their analysis, a reasonable waiting period for them to normalize their credit situation.

1 Art. 8, added on July 8, 2009 - Resolution CD-SIBOIF-591-1-JUL8-2009