RegAlertRule · SIBOIF · 20 Aug 2008 · CD-SIBOIF-547-1-AGO20-2008
Norm on Credit Risk Management
This resolution establishes minimum provisions for financial institutions to identify, measure, monitor, limit, control, report, and disclose credit risk. It mandates the Board of Directors to adopt credit policies, establish a Credit Committee, and ensure independent asset classification. The document defines four credit categories—consumer, mortgage, microcredit, and commercial—and sets specific evaluation criteria for each, including mandatory cash flow analysis for commercial loans over $50,000 and foreign exchange risk assessments for similar amounts.
Resolution No. CD-SIBOIF-547-1-AUG20-2008
Dated August 20, 2008
The Board of Directors of the Superintendence of Banks and Other Financial Institutions, CONSIDERING I That the timely evaluation and classification of risky assets of Financial Institutions constitutes the most appropriate instrument to determine their solvency preventively; II That it is the supervised Financial Institutions themselves that must carry out the evaluation and classification of their risky assets in accordance with the criteria and methods established by the Superintendence, create and account for provisions so that they are properly reflected in the equity of the respective Institutions; III That the Superintendence must verify and confirm the validity of the evaluation and classification of risky assets carried out by Financial Institutions, or order the pertinent changes, and determine adjustments in provisions; IV That based on the authority granted by article 3, numerals 3 and 13, and article 10, numeral 7, of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms contained in Law 552, Law of Reforms to said Law 316; In exercise of its powers, HAS ISSUED The following, NORM ON CREDIT RISK MANAGEMENT
CHAPTER I
CONCEPTS, OBJECT AND SCOPE
Art. 1 Concepts.-
1 For the purposes of application of the provisions contained in this norm, the terms indicated in this article, both in uppercase and lowercase, singular or plural, will have the following meanings:
a) Risky Assets: All credit portfolio operations and contingent operations that in some way signify direct or indirect financing in favor of natural or legal persons shall be understood as risky assets. Also considered risky assets are goods received in credit recovery, the investment portfolio, and accounts receivable. Insurance premiums and bonds payable to clients and accounts receivable from reinsurers for commissions or reimbursements for claim payments are excluded. b) Days of Delinquency: For single-maturity credits, the days elapsed since the credit maturity date; for credits payable in installments, the days elapsed since the due date of the installment (interest, principal, or combination of principal and interest). c) Dollars: United States dollars at the official exchange rate. d) Total Indebtedness: The sum of credit operations (direct and indirect) and contingent, according to information available in the Risk Central of the Superintendence and private risk centers available to the financial institution, as well as information provided by the client. e) Financial Institution: Refers to banks, finance companies, and insurance companies. f) Portfolio Classification: Is the action of analyzing and evaluating the recoverability level of the set of credits of each debtor, including corresponding contingent operations and any other obligation they have with the institution. g) Judicial Collection Credit: A credit is considered in judicial collection when it is in the process of collection via this channel. h) Debtor: Is the natural or legal person who has incurred obligations directly or indirectly with the financial institution. i) General Banking Law: Law 561, General Banking Law, Non-Banking Financial Institutions and Financial Groups, published in La Gaceta, Official Diary, number 232, of November 30, 2005. j) Credit Foreign Exchange Risk: Possibility of suffering losses derived from debtors' non-compliance in the payment of their credit obligations due to mismatches between their net exposures in foreign currency due to variations in the exchange rate.
k) Credit Risk: Potential loss from the failure to pay by a debtor or counterparty in the operations carried out by institutions. l) Overindebtedness: Level of indebtedness that, due to its excessive nature relative to income and the debtor's payment capacity, puts at risk the fulfillment of their obligations. m) Superintendence: Superintendence of Banks and Other Financial Institutions. n) Superintendent: Superintendent of Banks and Other Financial Institutions. o) Accounting Framework: Accounting Framework for Banking and Financial Institutions. Art. 2 Object.- This norm aims to:
a) Establish minimum provisions on risk management that institutions must have to identify, measure, monitor, limit, control, report, and disclose credit risk. b) Establish minimum guidelines to regulate the evaluation and classification of risky assets according to the quality of debtors. c) Determine minimum provision requirements according to expected losses of the respective assets. Art. 3 Scope.- The provisions of this norm are applicable to banks, finance companies, and insurance companies.
CHAPTER II
RESPONSIBILITIES OF THE BOARD OF DIRECTORS
Art. 4 Responsibilities.- The Board of Directors of the financial institution is responsible for adopting the following measures:
a) Establish policies oriented towards adequate management of credit administration and asset evaluation and classification. These measures must include, among other aspects, the following:
1) Criteria for granting credits, which will include aspects such as markets, products, type of clientele, etc., in which the institution will operate, as well as global limits of risks to be assumed for each of them, requirements that clients must meet and guarantees required to grant operations, specifying minimum review period of evaluation, both of information, solvency and indebtedness, debt service capacity, as well as liquidity and other relevant factors, according to business segment and type of operation.
2) The general pricing policy to apply.
3) Responsibilities and delegated powers of different bodies and persons in charge of granting, formalizing, monitoring, valuing, and controlling operations.
4) Requirements that studies and analyses of operations to be performed before granting and during their validity must meet.
5) Minimum documentation that different types of operations must have for granting and during their validity.
6) Evaluation of revolving commercial credit lines, at least once a year, to verify that the credit subject has complied with agreed conditions.
7) Incorporate procedures that allow verifying that disbursements are used according to the purpose for which they were agreed.
8) Definition of criteria to classify operations based on their credit risk and the method to quantify estimates of impairment losses.
9) Limit parameters corresponding to financial indices and other factors that determine each analyzed risk category.
10) Procedures to keep Board of Directors members permanently informed.
b) Review credit policies at least once a year. c) Establish the Credit Committee. d) Delimit the functions and responsibilities of risk administration bodies, operational area, and commercial or business area. e) Establish the asset evaluation and classification area, so that it can develop its functions with absolute independence and effectiveness in the verification process of correct evaluation and classification of assets, in accordance with provisions established in the General Banking Law and in this norm.
f) Approve for mandatory use of the financial institution a manual of procedures for credit risk management and asset evaluation and classification, considering as minimum the provisions established in this norm. g) Supervise such evaluations and classifications. h) Ensure that administration and control bodies implement and execute provisions emanating from the Board of Directors, as well as provisions established in this norm and regulations governing comprehensive risk management. i) Ensure that the financial institution has credit information systems, for managing credits in different stages of the credit process, which as minimum must:
1) Allow proper interrelation between different areas participating in the credit process.
2) Generate reliable reports, avoid multiple entries and data manipulation, as well as allow automatic, timely, and transparent reconciliation of accounting.
3) Maintain adequate controls that guarantee confidentiality of information, ensure its physical and logical security, as well as measures for information recovery in contingency cases.
4) Provide necessary information for decision-making on credit matters, by the Board of Directors, Credit Committee, management, and business areas in charge of credit operation.
CHAPTER III
GROUPINGS FOR CLASSIFICATION
OF THE CREDIT PORTFOLIO
Art. 5 Groupings.-
2 To evaluate the credit portfolio, four groupings will be formed, which must be treated separately according to the criteria outlined below:
a) Consumer Credits.- Are all credits granted to natural persons destined to finance the acquisition of consumer goods or payment of personal obligations and services, whose main source of income comes from salaries, consulting remuneration, rents, rentals, interest on deposits, return on investments, pensions, among others. Also, credits disbursed through credit cards will be imputed to this group, as well as financial leasing contracts, provided that the payment source is equal to that previously stated. b) Mortgage Credits for Housing - Are credits granted to natural persons for the acquisition, construction, repair, remodeling, expansion, improvement of housing, or acquisition of lots with services, provided they are backed by mortgage guarantee. Also, credits granted for purchase or construction of social interest housing, single-family or multi-family, under the terms referred to in Law No. 677, Special Law for the Promotion of Construction of Housing and Access to Social Interest Housing and its reforms, published in La Gaceta, Official Diary No. 80, of May 4, 2009 (Law No. 677), will be imputed to this group. The above enumeration must be understood as exhaustive, therefore it does not include other types of credits, even if they are backed by mortgage guarantee, which must be classified as commercial credits. c) Microcredit.- Credits granted throughout the Financial System, in national or foreign currency up to the equivalent of ten thousand dollars (US$10,000.00), to persons with small-scale established own business and which will be returned with the product of sales of goods and services from the same. These credits are granted massively using specialized microcredit credit methodologies to evaluate and determine the willingness and payment capacity of the potential client. Also, credits disbursed through credit cards will be imputed to this group, provided that the payment source is equal to that previously stated. d) Commercial Credits - Are credits granted in national or foreign currency for amounts greater than the equivalent of ten thousand dollars (US$10,000.00) to natural or legal persons, oriented to finance economic sectors, such as: industrial, agricultural, tourism, commerce, export, mining, construction, communications, services, and all other commercial nature obligations of the debtor. Also, Small and Medium Enterprise (SME) debtors will be imputed to this group, according to the definition given to this sector by the law on the matter, as well as all financial leasing contracts signed with legal or natural persons on capital goods, understanding by such those destined to production or provision of some service, regardless of their value. The commercial portfolio will be integrated, among others, by the following operations:
1) Loans
2) Discounts
3) Interest and commissions receivable
4) Acceptances
5) Authorized overdrafts
6) Bank guarantees
7) Issued and confirmed letters of credit
8) Advance on export documents
9) Bills of exchange
10) Factoring operations (Factoring)
11) Financial Leasing (Leasing)
12) Debtors from installment sales of goods
13) All other commercial nature obligations of the debtor.
CHAPTER IV
MINIMUM CRITERIA FOR DEBTOR EVALUATION
Art. 6 Evaluation criteria for consumer and mortgage credits for housing.- 3 Prior to granting consumer and mortgage credits for housing, the payment capacity and indebtedness will be analyzed based on, among others, the applicant's income, net worth, installments and balance of their various obligations. To obtain the aforementioned information, the financial institution will require the client to supply this, as well as, through consultation with the Risk Central of the Superintendence or other complementary background information that allows estimating the quality of the set of obligations of the debtor subject to evaluation, such as the debtor's credit history information from private risk centers available to the financial institution. Debtor evaluation will be carried out using credit technologies specialized in consumer and mortgage credits for housing according to the minimum risk management aspects referred to in letter a) of article 18 of this norm. Art. 7 Evaluation criteria for microcredits.- Prior to granting a microcredit loan, the financial institution must carry out an exhaustive evaluation of the debtor, which will contemplate the analysis of payment capacity and capitalization capacity based on the applicant's income, net worth, amount of their various obligations or liabilities, the amount of installments assumed with the financial institution, consultation with the Risk Central of the Superintendence or other complementary background information that allows estimating the quality of the set of obligations of the debtor subject to evaluation, such
as the debtor's credit history information from private risk centers available to the financial institution.
Debtor evaluation will be carried out using credit technologies specialized in microcredit that contain procedure manuals for credit risk management that clearly define the applied technology, as well as internal control manuals that allow controlling and monitoring the risk inherent to these operations. Art. 8 Evaluation criteria for commercial credits.- Prior to granting a commercial loan, the financial institution will carry out an exhaustive evaluation of the risk level of the total obligations of the debtor with the institution, based on the analysis and consideration of the following four main factors:
a) The debtor's global payment capacity: The evaluation of the global payment capacity of debtors will consider the financial burden implied by the maturity profile of all their obligations with the financial institution and other institutions of the Financial System, as well as the consideration of other indebtedness, banking and non-banking, with third parties, compared with the cash generation capacity from the debtor's different activities, including the characteristics of the economic environment in which they operate and the evaluation of credit foreign exchange risk as established in article 9 of this norm, for credits granted in foreign currency and córdobas with value maintenance, for amounts equal to or greater than the equivalent of fifty thousand dollars (US$ 50,000.00). Such comparison will be made through an analysis of background information regarding the economic and financial situation of the debtor, which must necessarily be requested, analyzed, and verified by the financial institution, such as financial statements, asset situation, projections of credit recoverability or other complementary background information that allows estimating the quality of the set of obligations of the debtor subject to qualification. The analysis of the debtor's capacity to service their obligations with the financial institution must be reflected in a cash flow statement, which will be mandatory for each debtor in the granting and evaluation of credits. Such background information must be included in the credit documentation that the financial institution has granted to the debtor, must be verified by the financial institution and be founded, reliable, and recent, with an age not greater than one year relative to the date of debtor evaluation and classification. b) Payment history: Is the past and present behavior of the debtor regarding credits they have or have had with the financial institution and other Institutions of the Financial System, considers the degree of compliance with conditions established in credit contracts, delinquency levels or other formal commitments. For this effect, the financial institution must keep a detailed list that will be in the file of each debtor, which must include background information relative to: credits granted, restructured, canceled, overdue, refinanced, extended or any other background that allows evaluating the past and present behavior of the debtor with the financial institution and with other banks. Evidence of having consulted the Risk Central of the Superintendence and any other private information system available to the financial institution will be included in this analysis. c) Purpose of the loan: The purpose of the loan must be specific, compatible with the financed economic activity, relative to the payment source and congruent with the structure and terms of the loan. The financial institution must clearly know the destination and use of funds lent to the debtor. d) Quality of guarantees:
Guarantees constituted by the debtor in favor of the financial institution represent an alternative source of credit recovery with the financial institution. The evaluation of the quality of guarantees must be based on background information relative to both their updated valuation, supported by appraisals or valuations carried out by duly registered appraisers in the Register of Appraisers of the Superintendence according to provisions established in regulations governing this matter for cases of guarantees located in the country, as well as specific legal aspects of each credit and associated guarantees, relative to their constitution and registration or others, that allow estimating the degree of recoverability via guarantees associated with credits, through possible execution of goods, values or other safeguards constituted in favor of the institution and corresponding partial or total cancellation of the guaranteed debt.
CHAPTER V
FOREIGN EXCHANGE RISK MANAGEMENT
Art. 9 Credit Foreign Exchange Risk.- Financial institutions must evaluate the credit foreign exchange risk of commercial debtors with credits granted in foreign currency and córdobas with value maintenance, for amounts equal to or greater than the equivalent of fifty thousand dollars (US$50,000.00). For such effects, financial institutions must establish policies and procedures to identify, measure and control credit foreign exchange risk, which must include at least the following aspects:
1) Identification of debtors exposed and not exposed to credit foreign exchange risk.
2) The requirements that the client must meet to qualify for a credit subject to credit foreign exchange risk, as well as the exclusion criteria for credit operations perfectly covered against credit foreign exchange risk.
3) Carrying out a measurement of the effect of a currency devaluation on the payment capacity of the debtor portfolio, at least with an annual frequency, with an updated source of information. The assumptions to be used must, at a minimum, assume two scenarios of currency devaluation, one of 1 and another of 2 times the inflation rate of the previous year respectively.
4) Financial institutions must take corrective actions they deem necessary (reclassification to a higher risk category, establishment of additional provisions, among others) on the credit classification or credit conditions in cases where they identify debtors whose payment capacity may be substantially affected as a result of potential exposure to foreign exchange risk.
Art. 10.-
4 Repealed.
CHAPTER VI
EVALUATION AND CLASSIFICATION OF RISK ASSETS
Art. 11 Evaluation and classification.-
5 The financial institution must permanently carry out an evaluation of the quality of its risk assets, classifying them according to the criteria established in this regulation, in order to estimate the recoverability of its risk assets and take the corresponding corrective and safeguard measures. The financial institution must keep the classifications of its debtors updated, according to the background information that indicates variations in the debtor's loss risk level. In no case will unclassified portfolio be admitted.
The evaluations and classifications of the different types of portfolio will be carried out as follows:
a) Consumer, mortgage for housing, and microcredit loans will be permanently classified based on their payment capacity measured according to their degree of compliance, reflected in the number of days of delinquency. To determine the classification, all credit operations contracted by the debtor with that institution will be gathered, so that the risk category assigned corresponds to the credit with the highest recovery risk within the institution, provided that such credit is classified in categories “D” or “E”, and the balance of this represents at least twenty percent (20%) of the total amount owed by the client within the institution.
When a commercial debtor maintains other operations of another type (consumer, mortgage for housing, or microcredit) in the same institution, the debtor will be evaluated as a whole based on the criteria for the evaluation of the commercial portfolio.
b) Commercial loans will be permanently classified based on delinquency or other events that warrant reclassification, and must be reclassified at the moment that, through respective monitoring, deterioration in the debtor's payment capacity or financial conditions is determined. Additionally, at least once a year, the asset evaluation and classification area of the financial institution will carry out an in-depth evaluation based on all criteria established in Article 8 of this regulation.
Additional provisions resulting from evaluations and classifications must be established and reflected in the financial statements of the financial institution in the same month they are determined.
Art. 12 Information to the Superintendent.- The classification carried out by the financial institution must be reported to the Superintendent at the close of each semester of the year, accompanied by a declaration from the Board of Directors of the financial institution, stating that it has taken knowledge of, analyzed, and approved the classification of 100% of the portfolio.
CHAPTER VII
CLASSIFICATION AND ESTABLISHMENT OF PROVISIONS FOR CONSUMER CREDITS
Art. 13 Scope and criteria for classification.- The financial institution must permanently classify its consumer portfolio based on the criteria established in Article 6 and letter a) of Article 11 of this regulation and establish the corresponding minimum provisions according to the following table:
| Classification | Days of Delay | Provision |
|---|---|---|
| A Normal Risk | Up to 30 | 2% |
| B Potential Risk | From 31 to 60 | 5% |
| C Real Risk | From 61 to 90 | 20% |
| D Doubtful Recovery | From 91 to 180 | 50% |
| E Unrecoverable | More than 180 | 100% |
These minimum provisions are without prejudice to each institution increasing its amount, if it considers that the assumed loss risk is greater than that determined according to the indicated procedure.
The provision percentage must be applied to the net balance not covered by eligible liquid guarantees as risk mitigants, as established in Chapter XIII of this regulation.
CHAPTER VIII
CLASSIFICATION AND ESTABLISHMENT OF PROVISIONS FOR MORTGAGE LOANS FOR HOUSING
Art. 14 Scope and criteria for classification.- 6 The financial institution must permanently classify its mortgage loan portfolio for housing based on the criteria established in Article 6 and letter a) of Article 11 of this regulation and establish the corresponding minimum provisions according to the following table:
| Classification | Days of Delay | Provision |
|---|---|---|
| A Normal Risk | Up to 60 | 1% |
| B Potential Risk | From 61 to 90 | 5% |
| C Real Risk | From 91 to 120 | 20% |
| D Doubtful Recovery | From 121 to 180 | 50% |
| E Unrecoverable | More than 180 | 100% |
6 Art. 14, reformed on September 19, 2008 - Resolution CD-SIBOIF-552-1-SEP19-2008 Art. 14, reformed on February 17, 2011 – Resolution CD-SIBOIF-665-2-FEB17-2011 Art. 14, reformed on June 11, 2014 – Resolution CD-SIBOIF-838-1-JUN11-2014 Art. 14, reformed on December 4, 2017 – Resolution CD-SIBOIF-1031-1-DIC4-2017
Social interest, single-family, or multi-family housing loans, granted in national or foreign currency for amounts that do not exceed the values established in Law No. 677 for the types of housing mentioned above and classified in category “A”, will have a provision of zero percent (0%). The other classification categories must be provisioned in accordance with the table above.
These minimum provisions are without prejudice to each institution increasing its amount, if it considers that the assumed loss risk is greater than that determined according to the indicated procedure.
The provision percentage must be applied to the net balance not covered by eligible liquid guarantees as risk mitigants, as established in Chapter XIII of this regulation.
Additionally, for debtors who have established eligible real guarantees as risk mitigants referred to in numeral 1), letter b) of Article 30 of this regulation, whose appraised realization value is equal to or greater than one hundred percent (100%) of the outstanding balance, the institution may apply the provision percentage corresponding to the immediately preceding lower risk classification assigned to the debtor, without changing the classification that corresponds to them.
CHAPTER IX
CLASSIFICATION AND ESTABLISHMENT OF PROVISIONS FOR MICROCREDITS
Art. 15 Scope and criteria for classification.- 7 The financial institution must permanently classify its microcredit portfolio based on the criteria established in Article 7 and letter a) of Article 11 of this regulation and establish the corresponding minimum provisions according to the following table:
7 Art. 15, reformed on June 10, 2009 – Resolution CD-SIBOIF-588-2-JUN10-2009
| Classification | Days of Delay | Provision |
|---|---|---|
| A Normal Risk | Up to 15 | 1% |
| B Potential Risk | From 16 to 30 | 5% |
| C Real Risk | From 31 to 60 | 20% |
| D Doubtful Recovery | From 61 to 90 | 50% |
| E Unrecoverable | More than 90 | 100% |
These minimum provisions are without prejudice to each institution increasing its amount, if it considers that the assumed loss risk is greater than that determined according to the indicated procedure.
The provision percentage must be applied to the net balance not covered by eligible liquid guarantees as risk mitigants, as established in Chapter XIII of this regulation.
Additionally, for debtors who have established eligible real guarantees as risk mitigants referred to in numeral 1), letter b) of Article 30 of this regulation, whose appraised realization value is equal to or greater than one hundred percent (100%) of the outstanding balance, the institution may apply the provision percentage corresponding to the immediately preceding lower risk classification assigned to the debtor, without changing the classification that corresponds to them.
CHAPTER X
CLASSIFICATION AND ESTABLISHMENT OF PROVISIONS FOR COMMERCIAL CREDITS
Art. 16 Classification categories.-
8 The financial institution must permanently classify its commercial credit portfolio based on the criteria established in Article 8 of this regulation and establish the corresponding minimum provisions according to the following table:
| Classification | Description | Provision |
|---|---|---|
| Category A; Normal Risk | 1) The fulfillment of the debt amortization plan has not presented any kind of defects, except for delays of up to thirty (30) days; or; 2) The projected operating cash flow presents levels that cover the debt needs, on the agreed terms. No evidence or expectations of negative impacts on the primary variables of the projected cash flow are evident. Its leverage levels are those accepted by the financial institution for the activity it develops. Profitability is satisfactory; or; 3) In the case of new projects, the analysis must consider their nature and have duly updated and justified projections. The projected operating cash flow must widely cover the payment of financial obligations to be incurred with the institution; and there must be sufficient collateral and the payment source duly identified, whether it is from the project itself or an alternative source that is part of the original loan structuring. | 1% |
8 Art. 16, reformed on August 9, 2013 – Resolution CD-SIBOIF-793-1-AGOST9-2013
| Classification | Description | Provision |
|---|---|---|
| Category B; Potential Risk | 1) Some degree of non-compliance with conditions, such as payment delays of up to sixty (60) days, or extensions that do not exceed a term of six (6) months, resulting from negative situations that may have temporarily affected the debtor, provided that such extensions comply with what is established in Article 35 of this regulation; or; 2) It presents adequate operating cash flow, allowing it to operate the business normally and with the capacity to meet its obligations on the agreed terms. It presents positive liquidity with a constant trend. It presents an adequate degree of leverage. Profitability has been temporarily reduced, which can be overcome in the short term; or; 3) In the case of new projects, the projected operating cash flow must be adequate to meet financial obligations; and there must be sufficient collateral and the payment source duly identified, whether it is from the project itself or an alternative source that is part of the original loan structuring. | 5% |
| Category C; Real Risk | 1) Delays in payments and obligations of up to ninety (90) days, and extensions that do not exceed a term of six (6) months, provided that such extensions comply with what is established in Article 35 of this regulation; or; 2) Long-term perspective with a stable/decreasing trend. It presents operating cash flow at break-even, susceptible to trending downward. The business resorts with some periodicity to secondary sources of cash generation to face operational requirements and sporadic deficits. It presents decreasing and compromised liquidity, profitability is negative with a decreasing trend, with potential impact on equity, where losses have a negative effect on payment capacity in terms of flow. For new projects of medium and long maturity, where the main variables of the projected flow are affected, the project will need external sources not contemplated in it to be able to have payment capacity, but they could be overcome in the short term. | 20% |
| Category D; Doubtful Recovery | 1) Delays in payments and obligations of up to one hundred eighty (180) days, and credits matured in the same financial institution; or; 2) Clearly identified weaknesses in cash flow, liquidity, leverage, and/or profitability, which put the debtor's capacity to face its debt obligations at risk. A necessary and clear dependence on secondary repayment sources is required to prevent default. The business viability is doubtful and it is expected that bankruptcy or suspension of payments procedures will begin. The deterioration in quantitative elements is then considered permanent. | 50% |
| Classification | Description | Provision |
|---|---|---|
| Category E; Unrecoverable | 1) Delays in obligations of more than one hundred eighty (180) days; or; 2) The debtor stopped paying and has no capacity to face its contractual debt obligations. The business is no longer viable or has such a small value that continuing to maintain the loan as a banking asset is no longer justifiable; or; 3) The debtor has not invested the resources lent by the financial institution in their entirety and in strict compliance with the activity or purpose requested; or; 4) The debtor has diverted pledges; or; 5) When the supervised financial institution does not provide detailed information on the capital structure of another legal entity linked to the debtor legal entity. | 100% |
The provision percentage must be applied to the net balance not covered by eligible liquid guarantees as risk mitigants, as established in Chapter XIII of this regulation.
Additionally, for debtors who have established eligible real guarantees as risk mitigants, the following procedure may be followed:
a) In the case of guarantees referred to in numeral 1), letter b) of Article 30 of this regulation, whose appraised realization value is equal to or greater than one hundred percent (100%) of the outstanding balance, the institution may apply the provision percentage corresponding to the immediately preceding lower risk classification assigned to the debtor, without changing the classification that corresponds to them.
b) In the case of guarantees referred to in numeral 2), letter b) of Article 30 of this regulation, whose certificate of deposit value is equal to or greater than one hundred fifty percent (150%) of the outstanding balance, after deducting any pending encumbrances, the institution may apply the provision percentage corresponding to the immediately preceding lower risk classification assigned to the debtor, without changing the classification that corresponds to them.
CHAPTER XI
REVIEW OF CLASSIFICATION BY THE SUPERINTENDENT
Art. 17 Review of portfolio classification by the Superintendent.- The Superintendent may review at any time the asset portfolio classifications reported by the financial institution, such review potentially leading to modifications or total or partial reclassifications of the assets considered, or to ordering a new classification when significant discrepancies are observed.
The review of the portfolio classification may be carried out as follows:
a) For consumer, mortgage for housing, and microcredit loans, one hundred percent (100%) of the portfolio will be reviewed based on its delinquency.
b) For commercial loans, the review will be carried out as follows:
1) Using directed samples according to Superintendent criteria (debtors with significant amounts, debtors by economic sector, etc.). In these cases, respective provisions will only be established when the classification determined by the Superintendent results in a higher risk compared to the classification determined by the financial institution; and/or
2) Using a representative sample determined statistically and randomly. The provision percentage determined for that sample, the Superintendent will extrapolate over the rest of the debtors in the selected portfolio population. If the sum of the provision determined for the sample plus the provision resulting from the extrapolation is greater than the provision accounted for by the evaluated institution, it must proceed to establish the difference. Otherwise, it should not result in a reduction of provisions.
The provisions resulting from evaluations carried out by the Superintendent must be established and reflected in the financial statements of the financial institution no later than the close of the same month in which they are determined.
Art. 18 Provision for deficiency in the management of consumer, mortgage for housing, and microcredit credit.- 9 The provision for deficiency in the management of consumer, mortgage for housing, and microcredit credit will be determined as follows:
a) For consumer and mortgage for housing loans: The Superintendent, in its inspection visits, will evaluate the consumer and mortgage for housing credit activity of the financial institution in order to verify if there are additional risk factors due to deficiency in the management of consumer and mortgage for housing credit risk; and, consequently, the need to establish a provision for additional risk.
9 Art. 18, reformed on January 28, 2009 – Resolution CD-SIBOIF-569-1-ENE28-2009 Art. 18, reformed on April 29, 2009 – Resolution CD-SIBOIF-583-1-ABR29-2009
To determine the provision for additional risk, the Superintendent will evaluate the policies, practices, and procedures for granting and administering consumer and mortgage for housing credits, verifying that they contemplate at least the following aspects:
1) Payment capacity, identifying income sources and their stability.
2) Taking into account the total indebtedness of the debtor (and their spouse, when their income is included in the analysis) with the institution and with other financial institutions in the financial system in the calculation of total debt to determine their borrowing capacity and their character of over-indebtedness.
3) Considering among the risk differentiating variables, the number of institutions with which debtors have incurred obligations, as well as the total debt/net annual income or total debt/net monthly income ratios as a selection and/or alert factor, applying a criterion consistent with the risk profile of the clientele, segmented by income level.
4) Considering appropriate levels of payment/income or payment/net flow after expenses, to determine borrowing capacity, adequately differentiated by product and income range, using realistic assumptions when converting credit balances into payment equivalents.
5) Carrying out the complete evaluation process for granting credits for all credit modalities, including line extensions. In this sense, a new evaluation must be considered that includes borrowing capacity at the date and payment behavior in the system, among other factors.
6) Considering for the granting of mortgage credits, a loan-to-value ratio consistent with the risk profile of the clients.
7) In the case of revolving credit lines, a maximum level must be set based on the client's payment capacity and their total indebtedness in the system.
8) Including as part of the monitoring of credit portfolios the analysis and periodic evaluation of the evolution of their quality, not only based on historical delinquency and other risk discrimination factors but also based on the date of granting the credits (harvest analysis) in order to be able to take corrective measures. In particular, this analysis must be applied with special emphasis on the results of campaigns to increase
lines of credit by card, or of client acquisition for products of consumer credits,
9) Have indicators and alert systems for monitoring the use of
credit card through cash withdrawals, as well as for the application of credit risk reduction measures that are necessary.
10) In the case of credit cards, identify debtors who only
effect the minimum payment, and establish specific follow-up mechanisms to take corrective measures that may be necessary.
When it is determined that the policies, practices and procedures of granting, administration and control of credits do not comply with the guidelines indicated in this subsection, in the judgment of the Superintendent, according to the level of deficiencies found, it may order the financial institution to constitute and maintain an additional provision to those referred to in articles 13, 14 and 17 of this standard, from point twenty-five (0.25%) to point fifty percent (0.50%), with respect to the net book value of the portfolio of consumer and mortgage credits for housing. In the event that the Superintendent orders the financial institution to constitute the aforementioned provision, the general manager must put it in knowledge of the Board of Directors through its President urging said higher management body to take the necessary measures to correct the deficiencies in the mechanisms, guidelines, procedures and policies dictated by said body for the management of consumer and mortgage credits for housing. Such provision may be eliminated, by resolution of the Superintendent, when in the next evaluation of the Superintendence compliance with the guidelines referred to in this subsection is proven; or at the request of a party, demonstrating compliance with the aforementioned guidelines. b) For microcredits: The Superintendence in its inspection visits, will evaluate the microcredit activity of the financial institution with the purpose of verifying if there are additional risk factors due to deficiency in the management of microcredit risk; and, consequently the need to constitute a provision for additional risk. To determine the provision for additional risk, the Superintendence will evaluate the policies, practices and procedures for granting and administration of microcredits, verifying that they contemplate at least:
The existence of adequate credit technology for the selection of the borrower, determination of their payment capacity, administration and
recovery of credits, as well as an appropriate internal control system; Adequate system for evaluation and classification of portfolio and mechanisms effective for verifying its functioning, reviewed in a timely manner according to the situation; The existence of a computer system and procedures for the follow-up of microcredit operations. When it is determined that the policies, practices and procedures of granting, administration and control of credits do not comply with the guidelines established in this subsection, in the judgment of the Superintendent, according to the level of deficiencies found, it may order the financial institution to constitute and maintain an additional provision to those referred to in articles 15 and 17 of this standard, from point twenty-five (0.25%) to point fifty percent (0.50%), with respect to the net book value of the portfolio of microcredits. The provision will be determined, based on the review of a sample representative of borrowers, determined in a random manner, oriented to achieve a greater scope of analysis. The frequency of cases in which there are deviations or non-compliance with credit policies and procedures established and/or sound practices of granting and administration of credits, among them, the lack of any of the following:
1) Home, work and updated data sheet verification, including
identity documents;
2) Verification of the source of income and the reasonable estimation of the
payment capacity;
3) Verification of payment history and the level of indebtedness of the
client in institutions of the Financial System and with other creditors (in case of having access);
4) Verification of payment history and the level of indebtedness of the
guarantor in institutions of the Financial System and with other creditors (in case of having access);
5) Verification, when applicable, of the perfection of real guarantees,
their adequate valuation and of the measures adopted for their protection;
6) Adequate support, for selected and approved clients through
automated procedures, including an adequate historical database for said clients;
7) Documentation required by its credit policy, both of the application,
approval, as well as the contract and guarantees, if required;
8) Follow-up, in accordance with what is established in its credit technology,
of the domicile, the situation and activity of the client, which must be recorded in a communication of the respective credit officer; and,
9) Verification that they are complying with the other aspects of the policy or
credit technology.
When the frequency of cases with deviations or non-compliance exceeds the twenty percent (20%) of the sample, the Superintendent may order the financial institution to constitute and maintain the provision for deficiency in the management of microcredit referred to above. In the event that the Superintendent orders the financial institution to constitute the aforementioned provision, the general manager must put it in knowledge of the Board of Directors through its President urging said higher management body to take the necessary measures to correct the deficiencies in the mechanisms, guidelines, procedures and policies dictated by said body for the management of microcredit. Such provision may be eliminated by resolution of the Superintendent, when the next evaluation of the Superintendence yields discrepancies at a level lower than the established parameters; or at the request of a party, demonstrating compliance with the aforementioned guidelines. Art. 19 Provision for deficiency in the management of classification of commercial credits.- 10 In the event that the result of the inspection carried out by the Superintendence based on a representative sample determined in a statistical and random manner, compared with the classifications of the financial institution found in the inspection, indicates classification discrepancies that are equal to or greater than twenty percent (20%) of the number of cases or to ten percent (10%) of the amounts of the corresponding provisions, the Superintendent will order the institution a new evaluation that must be effected within a period not greater than ninety (90) days, and simultaneously, in the judgment of the same, according to the level of classification discrepancies found, will order the constitution of a provision for deficiency in the management of classification of credit additional to those mentioned in articles 10 and 16 of this standard, from point twenty-five (0.25%) to fifty percent (0.50%), with respect to the net book value of the portfolio of commercial credits.
10 Art. 19, reformed on January 28, 2009 – Resolution CD-SIBOIF-569-1-JAN28-2009 Art. 19, reformed on April 29, 2009 – Resolution CD-SIBOIF-583-1-APR29-2009
In the event that the Superintendent orders the financial institution to constitute the aforementioned provision, the general manager must put it in knowledge of the Board of Directors through its President urging said body of higher management to take the necessary measures to correct the deficiencies in the mechanisms, guidelines, procedures and policies dictated by said body for the evaluation and classification of assets. Such provision may be eliminated by resolution of the Superintendent, when the next evaluation of the Superintendence yields discrepancies at a level lower than the established parameters; or at the request of a party, demonstrating that as a result of a new evaluation compliance with the evaluation and classification guidelines referred to in this standard is met. Art. 20 Reclassification of the debtor.- In the case of reclassifications ordered by the Superintendent through resolutions resulting from on-site inspections of the loan portfolio for commercial credits, the financial institution must adopt them replacing its own. Such individual classifications, except in the case of reclassifications to higher risk categories, cannot be modified without prior express authorization of the Superintendent.
CHAPTER XII
SCOPE AND CRITERIA FOR THE EVALUATION AND
CLASSIFICATION OF THE INVESTMENT PORTFOLIO AND ACCOUNTS RECEIVABLE Art. 21 Evaluation and classification.- 11 For purposes of the evaluation and classification of the investment portfolio and accounts receivable, financial institutions must:
a) In the case of the investment portfolio apply the criteria established in the Accounting Framework; b) In the case of accounts receivable, apply the criteria used for the evaluation, classification and constitution of provisions for consumer credits.
CHAPTER XIII
RISK MITIGATING GUARANTEES
Art. 22 Eligible guarantees as risk mitigants.- 12 Eligible guarantees as risk mitigants shall be considered, all liquid guarantees referred to in article 29; and real guarantees referred to in numerals 1) and 2), of subsection b) of article 30 of this standard.
11 Art. 21, reformed on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DEC4-2018 12 Art. 22, reformed on August 09, 2013 – Resolution CD-SIBOIF-793-1-AUG9-2013
The provisions of the preceding paragraph do not prevent financial institutions from backing their risk assets with the rest of non-eligible real guarantees, fiduciary guarantees or any other asset legitimately susceptible of being received as guarantee referred to in articles 30 and 31 of this standard. Art. 23 Requirements of guarantees.- 13 All eligible guarantees as risk mitigants must meet the following requirements:
a) Executable, that is, they are duly constituted. b) Alienable, that is, there is a market that facilitates their quick realization. c) Valuable, that is, susceptible to measurement and appraisal. Such appraisal must be carried out in accordance with what is established in the regulations that regulate the matter of appraisers who provide services to institutions of the Financial System. For the case of mortgage guarantees for social interest housing credits, single-family or multi-family, granted in national currency or foreign currency for amounts that do not exceed the values established in Law No. 677, which are located in the same urbanization or subdivision, or are in condominium regime, and have housing models with identical physical characteristics (design, physical structure, built area, quality of materials, among others), an initial appraisal for all houses may be accepted, the one performed on the model house. For subsequent valuations that must be carried out in accordance with the periodicity established in article 27 of this standard, the aforementioned appraisal will not apply, but a new appraisal must be performed for each house. d) Transferable with reasonable costs. e) Stable in value, that is, the minimum value of the guarantee is maintained over time, and f) Insured in case their nature requires it. Art. 24 Maximum value applicable to eligible liquid guarantees as risk mitigants. 14 The maximum value applicable to eligible liquid guarantees as risk mitigants will be the following:
13 Art. 23, reformed on January 13, 2010 – Resolution CD-SIBOIF-610-2-JAN13-2010 Art. 23, reformed on February 17, 2011 – Resolution CD-SIBOIF-665-2-FEB17-2011 Art. 23, reformed on June 11, 2014 – Resolution CD-SIBOIF-838-1-JUN11-2014 Art. 23, reformed on December 4, 2017 – Resolution CD-SIBOIF-1031-1-DEC4-2017 14 Art. 24, reformed on March 15, 2016 – Resolution CD-SIBOIF-933-1-MAR15-2016 Art. 24, reformed on August 09, 2013 – Resolution CD-SIBOIF-793-1-AUG9-2013
In the event that a certain value does not have an active and liquid market, the valuation will be determined in accordance with what is established in the regulations that regulate the matter of portfolio valuation. Art. 25 Valuation criteria.- The valuation of eligible guarantees as risk mitigants will be based on the realization value in accordance with what is established in the regulations that regulate the matter of appraisers who provide services to institutions of the Financial System.
Art. 24, reformed on November 23, 2012 – Resolution CD-SIBOIF-757-3-NOV23-2012 ELIGIBLE GUARANTEE AS RISK MITIGANT VALUATION MAXIMUM VALUE APPLICABLE State Values Market Value 100% Certificates of time deposits, bank guarantees, guarantees, Stand By letters of credit and any other liquid instrument, backed, accepted guaranteed by financial institutions of the country. Nominal Value 100% Certificates of time deposits, bank guarantees, guarantees, Stand By letters of credit and any other liquid instrument, backed, accepted guaranteed, including guarantee funds, by financial institutions of the exterior qualified as first order. Nominal Value 100% Securities (Bonds, commercial paper and shares) issued by financial institutions of the exterior of dispersed share capital whose shares are traded on a stock exchange or regulated market and are qualified as first order. Market Value
1) 80% fixed income
2) 70% variable
income
Securities issued by the central bank or ministry of finance of States with first order country risk rating.
Market Value 90%
Debt and capital securities of companies of dispersed share capital whose shares are traded on a stock exchange or regulated market and that such issuances are qualified as first order investments. Market Value
1) 80% fixed income
2) 70% variable
income
Certificates of Credit for the Transformation of Coffee (CCTC), governed by Law No. 853, Law for the Transformation and Development of Coffee, and its reforms.
Nominal Value 100%
Art. 26 Insurance policy.- In the case of eligible guarantees as mitigants of risk constituted by real estate, said properties must be insured by insurance policy in favor of the institution or endorsed in favor of the same. The above only in case that the real estate by its own nature requires it. The above without prejudice to the fact that financial institutions may require the taking of insurance for assets not considered as eligible guarantees as mitigants of risks. Art. 27 Periodicity of valuations.- 15 The financial institution must perform valuations of its liquid guarantees at least once a month. It will keep at the disposal of the Superintendent the background such as valuations and appraisals, as well as the evaluations of the financial institution that support the amounts recorded or accounted for. In the case of mortgage guarantees, the valuations must be performed at least every three (3) years, excepting mortgage guarantees for social interest housing credits, single-family or multi-family, granted in national currency or foreign currency for amounts that do not exceed the values established in Law No. 677, which are located in the same urbanization or subdivision, or are in condominium regime, that have housing models with identical physical characteristics (design, physical structure, built area, quality of materials, among others), and that have valid insurance, which must be performed at least every seven (7) years. A new valuation will not be required when the guaranteed credit is classified in categories “A” or “B”, as long as the principal balance plus interest of said credit has been reduced by a percentage equal to or greater than fifty percent (50%), or the realization value in the market of the asset constituted as guarantee covers two (2) or more times the amount owed. Notwithstanding the above, the financial institution must perform new valuations when the following situations occur:
a) Adverse market conditions and/or price drop; b) Natural disasters that affect the guaranteed assets; or
15 Art. 27, reformed on January 13, 2010 – Resolution CD-SIBOIF-610-2-JAN13-2010 Art. 27, reformed on February 17, 2011 – Resolution CD-SIBOIF-665-2-FEB17-2011 Art. 27, reformed on June 11, 2014 – Resolution CD-SIBOIF-838-1-JUN11-2014 Art. 27, reformed on December 4, 2017 – Resolution CD-SIBOIF-1031-1-DEC4-2017
c) The credit backed by a mortgage guarantee on real estate is subject to restructuring.
Art. 28 Performance of new valuations by instructions of the Superintendent.- For purposes of calculating the level of coverage of the obligations of the debtor, the Superintendent may estimate a lower value of the guarantees than reported by the financial institution, in those cases where a lower value is reasonably presumed due to deficient or unreliable appraisals, obsolescence of the asset, new market conditions and prices of goods, losses or expenses related to the execution or liquidation process or due to difficult alienation within a prudent period. In any case, the Superintendent may order the performance of new valuations at the expense of the financial institution.
CHAPTER XIV
GUARANTEES
Art. 29 Liquid guarantees.-
16 Liquid guarantees or quick realization are considered, the following:
a) Liquid guarantees are considered those that meet all and each one of the following requirements:
1) Allow a quick realization of the guarantee in cash, with
which the guaranteed obligation can be paid in full or partially, without significant costs;
2) Have adequate legal documentation;
3) Do not present prior obligations that could decrease their value or in
any way prevent the financial institution from acquiring clear title;
4) Their value is permanently updated.
b) The following will be accepted as liquid guarantees, among others:
1) State Values: Public debt securities issued or guaranteed by the
Central Bank of Nicaragua or the Ministry of Finance and Public Credit; as well as guarantee funds and State guarantees.
2) Instruments issued by the same financial institution: Certificates of
time deposits.
16 Art. 29, reformed on March 15, 2016 – Resolution CD-SIBOIF-933-1-MAR15-2016 Art. 29, reformed on August 09, 2013 – Resolution CD-SIBOIF-793-1-AUG9-2013
3) Instruments issued by financial institutions of the country: Certificates of
time deposits, guarantees, guarantees, Stand By letters of credit and any other liquid instrument, backed, accepted, guaranteed or guaranteed by financial institutions that during the twelve (12) months prior, have complied with the minimum required coefficient in accordance with the regulations that regulate the matter on capital adequacy, has not shown operational losses nor has been subject to fine for disengagement.
4) Instruments issued by financial institutions of the foreign:
Certificates of time deposits, guarantees, guarantees, Stand By letters of credit By and any other liquid instrument, backed, accepted, guaranteed or guaranteed, including guarantee funds, by Financial Institutions qualified as first order in accordance with the regulations that regulate the matter on deposit and investment limits.
5) Debt and share values of foreign financial institutions:
Securities (Bonds, commercial paper, and shares) issued by banks and foreign financial institutions of dispersed share capital whose shares are traded on a stock exchange or regulated market and are qualified as first order institutions in accordance with the regulations that regulate the matter on deposit and investment limits.
6) Securities issued and/or guaranteed by States with first order country risk
rating.
7) Securities issued by first order foreign companies: Securities of
debt and capital of companies of dispersed share capital whose shares are traded on a stock exchange or regulated market and that such issuances are qualified as first order investments in accordance with the regulations that regulate the matter on deposit and investment limits.
8) Certificates of Credits for the Transformation of Coffee (CCTC),
backed by the Trust of the Fund for the Transformation and Development of Coffee (FTDC) administered by the Bank of Development of Production; which will have coverage up to thirty percent for each of the rehabilitation and renewal credits, up to a maximum of Ten Thousand United States Dollars (US 10,000.00) per producer, in accordance with what is established in Law No. 853, Law for the Transformation and Development of Coffee, and its reforms. Art. 30 Real guarantees.- Real guarantees or medium realization are considered, the following:
a) Real guarantees are considered those that meet the following requirements:
1) Permit liquidation of the cash guarantee with moderate ease, with which the secured obligation can be cancelled without significant costs;
2) Have adequate legal documentation;
3) Not present prior obligations that could diminish their value or in any way prevent the financial institution from acquiring clear title; and
4) Their value is updated in accordance with what is established in article 27 of this regulation.
b) Real guarantees, among others, the following will be accepted:
1) First mortgage and/or subsequent rank, provided that it is in favor of the same financial institution, on real estate duly registered.
When it comes to bridge loans for construction, guaranteed by the land and the value of improvements built on it, the value of the land will be considered initially and the value of the guarantee will be increased considering the progress of the construction work, certified in writing by the site inspector. Only second-rank mortgages or subsequent ranks will be accepted as risk mitigants, when the preceding ones are registered in favor of the same financial institution that grants the financing. The residual value of the guarantee must cover the entire financing. The residual value will be considered that resulting from discounting from the realization value established in the most recent appraisal, the amount of the balances of the credits guaranteed with the previous mortgages.
2) Pledge bonds issued by general warehouses of deposits that are under the supervision of the Superintendence.
3) Pledge guarantee, on harvest, fruits, inventories, machinery, vehicles, furnishings, animals or things that are part of the movable or immovable goods or real rights registered.
4) The leased property under a financial lease contract
5) First naval or aircraft mortgages
6) Jewelry, jewels, artifacts and others considered easy to realize, custodied by the institution.
Art. 31 Fiduciary Guarantee.- Valuation: Demonstrate payment capacity and/or designation of movable or immovable goods, which may eventually serve to face the obligation
CHAPTER XV
OVERDRAFTS
Art. 32 Occasional Overdrafts.- An overdraft in a checking account occurs when the financial institution authorizes the payment of a check issued by the account holder or makes a debit without having the necessary funds for its payment. In the case that the financial institution has not formalized the overdraft in a liquidity or overdraft line in accordance with what is established in the following article, or when the client has not covered said overdraft in a period of thirty-one (31) days counted from the date of its origin, the financial institution must constitute a provision of fifty percent (50%) of the overdraft amount; and one hundred percent (100%) at sixty-one (61) days. Art. 33 Contractual Overdrafts.- The financial institution may opt to grant its previously evaluated clients, liquidity or overdraft lines for amounts according to their payment capacity, formalized through a commercial credit contract where explicit rights are recorded for the Institution, with terms, interest rates, and collection means with judicial value. Contractual overdrafts will be evaluated and classified according to the criteria established for the evaluation of commercial credits.
CHAPTER XVI
EXTENSIONS, REFINANCING AND RESTRUCTURINGS
Art. 34 Refinancing.-
17 Current credits with classification "A" that do not involve, prior to refinancing, a deterioration in the debtor's payment capacity will be considered refinancing.
The modifications made to the conditions of a credit contract in order to adjust the payment thereof to the deterioration of the client's payment capacity, cannot be considered refinancing, but extensions or restructurings, as appropriate, in accordance with what is established in this chapter. Art. 35 Extensions.- 18 An extension will be considered as the extension or expansion of the term originally agreed for the payment of a credit, without any other modification of the contract terms, motivated by a temporary deterioration in the payment capacity of the credits by the debtor. In case one or more of the original terms of the contract are modified, other than the term, the credit will be considered restructured, and must be treated in accordance with what is established in article 36 of this regulation. Extensions may be granted for a period not greater than six months of the term originally agreed. This term may be extended in case one or more of the assumptions in the projection cannot be fulfilled, even though at the moment the request was analyzed they were supported. In case of term extension, all assumptions, documents, bases and indicators used to support the authorization of said request, must be recorded in the client's file. In no case will the original term of the extension plus any extension exceed nine months. Installments may be extended, partially or totally, for the case of credits payable in installments or balances for the case of credits with a single maturity. No more than one extension may be granted to the same credit within a twelve-month period. Extensions must be processed as any other credit in accordance with the requirements established in this regulation and prior to their authorization, they must comply with the following:
a) The extension may only be granted for those credits with classification category "A". b) Have payment capacity, which evidence the return of the credit in a period not greater than the term of the extension. c) That the cause of non-payment on the agreed date is due to temporary external factors not attributable to improper actions or omissions of the debtor, and that the expectations of overcoming them are not greater than the term of the extension. d) That there has been no diversion of funds from the financed activity or from the pledge given as guarantee, nor breach of other contractual conditions oriented to the protection of the creditor.
17 Art 34, reformed on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art 34, reformed on December 09, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art 34, reformed on February 24, 2010 – Resolution CD-SIBOIF-616-2-FEB24-2010
e) That the debtor has not failed to comply with instructions or orientations of the technicians or officials of the creditor financial institution, whose effects could have caused a reduction in their capacity to pay their obligations, or weakening of the guarantees. The extended credit may be accounted for as current, once the client fulfills the total payment of the amount subject to the extension; otherwise, the credit will be considered in default and the days of default will be calculated from the originally agreed maturity date, that is, before the extension. For the case of credits payable in installments, the payment of the extended installments may be made at the end of the period through an extension of the originally agreed term. In this case, the extended credit may be accounted for as current, once the client regularizes its payments for a period of at least three months (installments). The provisions of this article are not applicable to consumer credits nor to microcredits that are not intended to finance economic and production activities. Art. 36 Restructurings.- 19 A credit will be considered restructured when the changes in the terms and conditions originally agreed are motivated by a deterioration in the payment capacity of the credits by the debtor. The restructuring must be processed as any other credit in accordance with the requirements established in this regulation and prior to its authorization, it must comply with the following:
a) The performance of a prior analysis and the approval by the corresponding instance of the institution; b) That the debtor has payment capacity, either as a result of the financed activity or from other activities that evidence the recovery of the credit in the new term and conditions agreed; c) That there has been no diversion of funds from the financed activity or from the pledge given as guarantee, nor breach of other contractual conditions oriented to the protection of the creditor; and d) The proportion of coverage of the originally agreed guarantee is maintained or improved. In cases where the guarantee has been affected by force majeure or fortuitous events and the client does not have goods
18 Art 35, reformed on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art 35, reformed on December 09, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art 35, reformed on February 24, 2010 – Resolution CD-SIBOIF-616-2-FEB24-2010
capable of being given as guarantee, the financial institution may proceed to restructure, provided that, through the restructuring, the recovery position of the debt is improved. For such cases, this situation must be duly documented in the debtor's file. Debt consolidation will be considered as a restructuring, when one or more of the credits to be consolidated have been granted by the same financial institution and, at least one of them is in arrears for more than thirty (30) days in the last ninety (90) days prior to the consolidation of the debts. Debt consolidation will be understood as credits granted to pay obligations that the client has with the granting financial institution or with another institution in the financial system, to take advantage of better market conditions. Art. 37 Classification of restructured microcredits, consumer credits and housing mortgages.- 20 Microcredits, consumer credits and housing mortgages subject to a restructuring will be classified in the risk category that the credit had before the restructuring. For all consumer credits, including those disbursed through credit cards that do not have liquid or real guarantees of those referred to in numbers 1), 3) (machinery and vehicles only) and 5) of letter b) of article 30 of this regulation, in no case will the classification be lower than risk category "C".
1) The classification of the credit may be improved up to category "A" in accordance with the criteria stated in this regulation for this type of credit, those restructured credits whose payment is agreed in equal and successive installments, after at least one of the following conditions is met:
a) Normal behavior in their payments of at least six (6) installments subsequent to the restructuring. b) That an amount equivalent to twenty-five percent (25%) of the principal of the restructured credit has been paid. The restructured credit may be accounted for as current, once the two conditions established in letters a) and b) above are met.
19 Art 36, reformed on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art 36, reformed on December 09, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art 36, reformed on February 24, 2010 – Resolution CD-SIBOIF-616-2-FEB24-2010
2) In case the credit is structured in installments that are not equal nor successive, the classification of the credit may only be improved up to category "A" in accordance with the criteria stated in this regulation for this type of credit after complying with what is indicated in letter b) of number 1) above. The restructured credit may be accounted for as current, once the condition established in this number is met.
If during the payment period of the six installments referred to in letter a) of number 1) of this article, the debtor shows non-compliance in the payment of the agreed installments and/or deterioration in their payment capacity, the financial institution must proceed to reclassify the credit to a higher risk category. Art. 38 Classification of restructured commercial credits.- 21 Restructured commercial credits will be classified in accordance with the criteria stated in this regulation for each category, in accordance with the evaluation of the debtor before the restructuring. The credit subject to restructuring will be considered in default when it has been subject to an extension previously and restructuring is carried out before the expiration of the extension term, or when the client has not fulfilled, at its maturity, the total payment of the amount subject to the extension. For these purposes, the days of default will be calculated from the originally agreed maturity date of the credit, that is, before the extension. In case the debtor has more than one credit and these are subject to restructuring via consolidation of them, for the calculation of default, the maturity date of the oldest credit will be used as reference. The restructuring of a credit will not induce a debtor to be automatically reclassified to a lower risk category, unless the following conditions are met:
a) Debtors who cancel the interest that they had pending payment before the date of formalizing the restructuring or debtors who have a secure payment source with 80% coverage of the total debts (principal and interest) or that the principal and interest of the restructured credit is 100% covered by liquid guarantees, may be reclassified up to category "B". The following are considered secure payment sources:
20 Art 37, reformed on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art 37, reformed on December 09, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art 37, reformed on February 24, 2010 – Resolution CD-SIBOIF-616-2-FEB24-2010
1) Flows from a pledge on harvest in favor of the creditor financial institution and that has been effectively delivered to the commercializing entity or its equivalent;
2) Flows from the payment of principal and interest of debt securities issued by the Central Bank of Nicaragua or the Ministry of Finance and Public Credit, duly pledged in favor of the creditor financial institution;
3) Securities issued by financial institutions of the country supervised by the Superintendence or by foreign financial institutions rated first class in accordance with the regulations governing the matter on deposit and investment limits, duly pledged in favor of the creditor financial institution; and
4) With prior authorization, any other that in the opinion of the Superintendent is considered a secure payment source.
b) The classification of the credit may be improved up to category "A" for those restructured credits whose payment is agreed in equal and successive installments, after at least one of the following conditions is met:
1) Normal behavior in their payments of at least twelve (12) months subsequent to the restructuring.
2) That an amount equivalent to twenty-five percent (25%) of the principal of the restructured credit has been paid.
The restructured credit may be accounted for as current, once the two conditions established in numbers 1) and 2) above are met. c) Credits that do not comply with what is established in letter a) above or are structured in installments that are not equal nor successive, may only be reclassified up to category "A", after receiving payment for an amount equivalent to twenty-five percent (25%) of the principal of the restructured credit. The restructured credit may be accounted for as current, once the condition established in this letter is met. For the purposes of the reclassifications referred to in letters a), b) and c) above, the new credit conditions must comply with the criteria stated in this regulation for the respective category.
CHAPTER XVII
21 Art 38, reformed on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art 38, reformed on December 09, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art 38, reformed on February 24, 2010 – Resolution CD-SIBOIF-616-2-FEB24-2010
EVALUATION OF ASSETS RECEIVED IN CREDIT RECOVERY 22 Art. 39 Recognition and Measurement of Non-Current Assets Held for Sale.- 23 The financial institution may recognize each of the assets received in credit recovery, in any of the following ways:
1) When as a result of a legally documented agreement there is a right over the assets and they have a value that can be measured reliably, they will be recorded in the Assets Received in Credit Recovery account. In this case, what is provided in articles 40, 41, 42 and 43 below will apply, or;
2) When the criteria established in International Financial Reporting Standard (IFRS) 5 and what is described below are met, it will be classified in the Non-Current Asset Held for Sale account.
The accounting procedure is as follows:
a) Classification to Non-Current Assets Held for Sale (IFRS 5) from the date of assignment of the asset.
The institution for initial registration in accordance with IFRS 5 must take the lower of:
i. The amount agreed in the transfer in payment or assignment in judicial auction, which does not include the remainder, when the base price of the auction is higher than the amount owed for all concepts; this amount being considered as the cost of the asset, and its
ii. fair value (determined in accordance with IFRS 13) minus selling costs (in accordance with IFRS 5).
The financial institution must clear the outstanding balance of the credit against the provision and in case there is a provision remainder, it must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributed Current Year Result. Subsequently, everything established in IFRS 5 applies. b) Reclassification of Assets Received in Credit Recovery to Non-Current Assets Held for Sale (IFRS 5).
22 Name of Chapter XVII, reformed on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018 23 Art 39, reformed on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018 Art 39, reformed on April 29, 2009 – Resolution CD-SIBOIF-583-1-ABR29-2009
This is the case when an assigned asset meets the IFRS 5 criteria after assignment and registration as Assets Received in Credit Recovery.
The reclassification may be made to the Non-Current Assets Held for Sale account and will be made at the lower value between:
i. The initial amount recognized in the Assets Received in Credit Recovery account, without considering its provision, and its
ii. fair value (determined in accordance with IFRS 13) minus selling costs (in accordance with IFRS 5).
For assets that are reclassified to IFRS 5 in the Opening Balance Sheet applying what is established in IFRS 1 First-time Adoption of IFRS, the accumulated provision of these, will be reversed in the corresponding sub-account of Transition Adjustment. The reclassification of Assets Received in Credit Recovery to IFRS 5 may only be carried out in a period not greater than 6 months, counted from the date of assignment. In case there is an excess of provision resulting from the reclassification of the asset received in credit recovery to non-current assets held for sale, this must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributed Current Year Result. Subsequently, everything established in IFRS 5 applies. c) Changes in the sales plan of the asset classified as Non-Current Assets Held for Sale (IFRS 5). When there is a change in the sales plan, because the IFRS 5 criteria are no longer met, the asset will be reclassified to the Assets Received in Credit Recovery account, at the book value recognized in the Non-Current Assets Held for Sale account, recognizing from the date of assignment the provision required in this article, for which it must consider the provision constituted as impairment, and in case there is a provision deficit, it will be constituted against the corresponding expense account of the statement of results. When the change in the sales plan corresponds to assets that were originally reclassified to IFRS 5 in the opening financial statements of January 1, 2018, the provision to be constituted from the date of assignment will be debited from the Transition Adjustment account, provided that the specific asset has a positive balance in the referred account for that concept. In case there is a provision deficit as required in the part
final of this article; it shall be constituted and recognized as an expense in the corresponding account of the income statement.
Subsequently, the remaining positive balance of the specific asset, recorded in the Transition Adjustment account, may be: i) reversed against accumulated earnings until the asset is sold; ii) and while the asset is not sold, it will complement the provision requirement established in this article. An asset registered as IFRS 5 and reclassified to the Received Assets in Credit Recovery account cannot be reclassified again under the scope of IFRS 5. The provision to be recorded for assets that are reclassified from IFRS 5 to the Received Assets in Credit Recovery account cannot be less than the following percentages of the asset's book value:
i. Movable assets:
- 30% minimum provision up to 6 months from the award of the asset.
- 50% minimum provision after 6 months up to 12 months.
- 100% provision after 12 months from the award of the asset.
ii. Immovable assets: - 30% minimum provision up to 12 months from the award of the asset.
- 50% minimum provision after 12 months up to 24 months from the award.
- 75% minimum provision after 24 months up to 36 months from the award.
- 100% provision after 36 months from the award.
d) Treatment of Undistributable Results.
Amounts registered in the sub-account of Undistributable Current Year Result and Undistributable Accumulated Results of Prior Years, will be distributable until the asset that generated them is sold or 100% provision is registered. Art. 40 Measurement and Recognition of Received Assets in Credit Recovery.- 24 The assets received in credit recovery shall be measured as follows:
24 Art. 40, amended on April 29, 2009 – Resolution CD-SIBOIF-583-1-ABR29-2009 Art. 40, amended on August 19, 2009 – Resolution CD-SIBOIF-593-2-AGOST19-2009 Art. 40, amended on December 9, 2009 – Resolution CD-SIBOIF-605-1-DIC9-2009 Art. 40, amended on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018
a) Initial Measurement: Assets received in credit recovery shall be measured at the lower of:
- The value agreed upon in the transfer in payment or the award value in judicial auction, as applicable.
- The realization value in accordance with the regulations governing appraisers providing services to institutions of the Financial System, as of the date of incorporation of the asset.
- The bank's book balance, corresponding to the principal of the credit plus interest, plus other receivables other than transactional costs. This without considering the provisions accounted for nor the cleaned interest prior to the award.
The value of the measurement methods in items 1) and 3) above must include the transactional costs incurred in the acquisition of such assets. Transactional costs shall be understood as costs directly attributable to the acquisition or realization of the asset (taxes, duties, professional fees to acquire or transfer ownership of the goods, etc.) b) Subsequent Measurement: Once the assets are registered in accordance with the above, they shall be measured at the book value less the provisions assigned to the asset, as established in the following article. Additionally, in the case of immovable assets, for any impairment loss. Art. 41 Constitution of Provisions.- 25 The financial institution shall transfer the respective provisions assigned to the credit to provisions for received assets in credit recovery. In the event that the value determined in letter a) of the previous article is less than the book balance of the corresponding credit, the financial institution must clean up the outstanding balance and transfer the remainder of the provisions assigned to the credit to provisions for received assets in credit recovery. Likewise, when there is more than one asset in the process of award, the financial institution shall transfer the respective provisions assigned to the credit as the assets are awarded and in proportion to the value determined in letter a) of the previous article. Without prejudice to the foregoing, these provisions must be adjusted to what is established in the following letter a):
a) Provisions: The provision accounted for cannot be less than the following percentages of the value of the asset registered in the books:
1) Movable assets:
- 30% minimum provision from its registration up to 6 months from the award of the asset.
- 50% minimum provision after 6 months up to 12 months.
- 100% provision after 12 months from the award of the asset.
2) Immovable assets: - The provision previously assigned to the credit before the award in accordance with the first and second paragraphs of this article, up to 6 months after the asset has been received in credit recovery.
- 30% minimum provision after 6 months up to 12 months from the award of the asset.
- 50% minimum provision after 12 months up to 24 months from the award.
- 75% minimum provision after 24 months up to 36 months from the award.
- 100% provision after 36 months from the award.
Art. 42 Valuation.-
26 Immovable assets received in credit recovery shall be valued in their entirety at least once a year, unless there is evidence that an impairment loss has occurred.
The valuation of said assets must be carried out based on the estimate of the realization value in accordance with the regulations governing appraisers providing services to institutions of the Financial System. All assets whose book value is greater than the equivalent in national or foreign currency of one hundred thousand dollars (US$100,000.00) must have valuations performed by independent appraisers of the financial institution,
26 Art. 42, amended on April 29, 2009 – Resolution CD-SIBOIF-583-1-ABR29-2009 Art. 42, amended on February 24, 2010 – Resolution CD-SIBOIF-616-3-FEB24-2010 Art. 42, amended on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018
duly registered in the Register of Appraisers of the Superintendency, with the exception of assets located outside the country.
Art. 42-bis Information to the Superintendent.- 27 The valuations and supporting background information must be available to the Superintendent for review. The financial institution must inform, through a detailed list, all assets received in credit recovery and their respective accounted amounts, with the periodicity established in the "Official Information Calendar" sent to all supervised entities. Immovable assets included in said list must be reflected indefinitely, until their sale is carried out. Art. 43 Reversal of Constituted Provisions.- The constituted provisions may be reversed once the respective asset is sold, previously considering against these provisions, any possible losses determined due to the decrease in the value of the asset at the time of sale. If the asset in question is sold for a higher value, both the excess of the sale value and the constituted provisions must be registered as income.
CHAPTER XVIII
ACCOUNTING FOR OVERDUE LOANS,
RECOGNITION AND/OR REVERSAL OF INTERESTS ON THEM, CLEANING UP OF BALANCES Art. 44 Single Maturity Loans.- 29 Consumer, microcredit, housing mortgage, and commercial credits that have not been paid on their maturity date, shall be transferred to overdue status thirty-one (31) calendar days, counted from the maturity date. Art. 45 Loans Payable in Installments.- 30 Consumer, microcredit, housing mortgage, and commercial credits payable in monthly, quarterly, semi-annual, annual, etc. installments, that have not been paid on their maturity date, shall be transferred to overdue status at ninety-one (91) calendar days, counted from the maturity date of the first unpaid installment. In the case of loans with installments with a payment frequency less than one month, they shall be transferred to overdue status after the non-payment of three consecutive installments. Art. 46 Suspension and Reversal of Financial Yields.- The accrual and/or suspension of financial yields shall be effected on the day the credit is transferred to overdue status, simultaneously cleaning up the accumulated interest to that date. For those debtors classified in categories D or E, even if they do not have overdue credits, they shall cease to recognize income for accrued interest and commissions and effect the cleaning up of the interest and/or accumulated commissions up to that moment. Art. 47 Cleaning Up.- 31 All credits must be cleaned up in accordance with what is established in the respective Accounting Framework, on the delinquency days detailed below:
a) Consumer credits, on delinquency day one hundred eighty-one (181). The financial institution may clean up a consumer credit on day 360, when said credit has real guarantees referred to in items 1), 3) (machinery and vehicles only) and 5) of letter b) of article 30 of this norm, whose appraised realization value is equal to or greater than one hundred percent (100%) of the outstanding balance and are in the process of judicial collection. b) Housing mortgage credits, microcredits, and commercial credits on delinquency day three hundred sixty (360). Housing mortgage credits, microcredits, and commercial credits that have real guarantees eligible as risk mitigants referred to in item 1), letter b) of article 30 of this norm, whose appraised realization value is equal to or greater than one hundred percent (100%) of the outstanding balance, are excepted, provided they are in the process of judicial collection. For control purposes, the Financial Institution must maintain for a period of no less than five years, records in Off-Balance Sheet Accounts of the balances originated by the cleanups carried out. In the event that there are immovable assets received in credit recovery related to cleaned-up credits, the financial institution must maintain said records in Off-Balance Sheet Accounts indefinitely, until their sale is carried out. The control of awarded assets on previously cleaned-up assets shall be carried out in the off-balance sheet account "For Recovery of Cleaned-Up Assets", reversing the corresponding amount registered in the cleaned-up account. Art. 47-bis Default Interest.- 32 The institution shall recognize as an asset the default interest of active credits when its policy establishes not to waive them in total or in part. Otherwise, it must register them in the off-balance sheet account of "suspended income".
CHAPTER XIX
31 Art. 47, amended on September 19, 2008 - Resolution CD-SIBOIF-552-1-SEP19-2008 Art. 47, amended on June 10, 2009 – Resolution CD-SIBOIF-588-2-JUN10-2009 Art. 47, amended on February 24, 2010 – Resolution CD-SIBOIF-616-3-FEB24-2010 Art. 47, amended on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018 32 Art. 47-bis, added on December 4, 2018 – Resolution CD-SIBOIF-1087-2-DIC4-2018
MINIMUM DEBTOR INFORMATION
Art. 48 Information Requirement for Debtors.- The financial institution shall require its customers from the moment they request their credits and before approving the operation, the necessary information according to the format of "Minimum Information of Debtor Customers of the Institution Duly Updated" exposed in Annex 1 of this norm, which is an integral part of it. Art. 49 Update and Analysis of Information.- The information required for credits must be permanently updated and analyzed, all the more so when there are variations. Art. 50 Identification of Persons Linked to Debtors.- 33 It is the responsibility of the financial institution to identify natural or legal persons linked to its debtors of commercial credits granted in national or foreign currency for amounts equal to or greater than the equivalent of one hundred thousand United States dollars (US$100,000.00), completing the information of Annex 2-A, 2-B and 2-C "Related Parties", which is an integral part of this norm. Art. 51 Powers.- 34 The Superintendent is authorized to do the following:
a) In special circumstances, financial institutions may request from the Superintendent specific exceptions to the application of this norm. He/She shall rule on it through a reasoned resolution, informing the Board of Directors of the Superintendency of such exceptions. b) Authorize the gradual constitution of provisions, both those determined by the financial institution itself and those instructed by the Superintendent, resulting from the application of any of the provisions established in this norm. The Superintendent shall rule on it through a reasoned resolution, informing the Board of Directors of the Superintendency of the authorization of the gradualness, if applicable. c) Modify the information requested in Annexes 1, 2-A and 2-B of this norm, to the extent that its application so requires.
33 Art. 50, amended on March 7, 2017 - Resolution CD-SIBOIF-987-5-MAR7-2017 Art. 50, amended on September 19, 2008 - Resolution CD-SIBOIF-552-1-SEP19-2008 34 Art. 51, amended on January 28, 2009 - Resolution CD-SIBOIF-569-1-ENE28-2009 Art. 51, amended on May 15, 2009 – Resolution CD-SIBOIF-585-2-MAY15-2009 Art. 51, amended on August 27, 2019 – Resolution CD-SIBOIF-1127-1-AGOST27-2019
CHAPTER XX
TRANSITIONAL PROVISIONS
Art. 52 Transitional.-
35 The following transitional provisions are established for the application of the new criteria for evaluation and classification of assets contained in this norm:
a) Financial institutions will have until March 31, 2009, to adapt their accounting, control, computer systems and others necessary for the recording of operations and other provisions contained in this norm. b) Financial institutions will have until May 31, 2009, to incorporate and implement in their credit policies, the minimum aspects of credit risk management established in letter a) of article 18 of this norm. c) Regarding what is established in Annex No. 1 of this norm, on the requirement of certified or audited financial statements for commercial credits granted to natural or legal persons, the first period to be considered will be the financial statements cut off at December 31, 2008 or June 30, 2009 or according to the approved fiscal regime. d) Financial institutions that as a result of the application of the provisions established in this norm require constituting provisions, may request from the Superintendent authorization to grade the application of said provisions, attaching a proposal of the gradual plan with the respective justification. e) Financial institutions that as a result of the application of the criteria established in this norm, require less specific provisions than those constituted, must account for the excess as generic provisions, so as not to affect the results of the period. Such generic provisions cannot be considered as components of secondary capital in the calculation of capital adequacy. These generic provisions may reduce them affecting the result of the period, until the Superintendency in on-site inspection evaluates the assets of the institution in accordance with the provisions established in this norm.
Article 52-bis. Transitional.-
36 The valuations of immovable assets received in payment or awarded as referred to in article 42 of this norm, which expire during the aforementioned period, are suspended for a period of six (6) months counted from October 1, 2018 to March 31, 2019.
35 Art. 52, amended on September 19, 2008 - Resolution CD-SIBOIF-552-1-SEP19-2008 Art. 52, amended on December 22, 2008 – Resolution CD-SIBOIF-566-1-DIC22-2008 Art. 52, amended on January 28, 2009 - Resolution CD-SIBOIF-569-1-ENE28-2009 36 Art. 52-bis, added on October 25, 2018 – Resolution CD-SIBOIF-1078-1-OCTU25-2018
appraisals of immovable assets received in payment or awarded as referred to in article 42 of this norm, which expire during the aforementioned period. 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.
CHAPTER XXI
FINAL PROVISIONS
Art. 53 Repeal.-
37 After the adaptation period referred to in letter a) of article 52 above has elapsed, the Prudential Norm on Evaluation and Classification of Assets, contained in Resolution CD-SIB-185-2-Nov9-2001, published in La Gaceta, Official Journal No. 13 and 14, of January 21 and 22, 2002, and its reforms contained in the following resolutions are repealed:
a) Reform of article 43 contained in Resolution CD-SIBOIF-199-3-ABR10-2002 of April 10, 2002; b) Reform of articles 11, 12, 36 and 45, contained in Resolution CD-SIBOIF-205-1-MAY29-2002 of May 29, 2002; c) Reform of article 45 contained in Resolution CD-SIBOIF-220-5-SEP11-2002 of September 11, 2002; d) Reform of article 37 contained in Resolution CD-SIBOIF-222-1-OCTU2-2002 of October 2, 2002; e) Reform of article 45 contained in Resolution CD-SIBOIF-232-1-ENE17-2003 of January 17, 2003; f) Reform of article 6 contained in Resolution CD-SIBOIF-239-1-MAR25-2003 of March 25, 2003; g) Reform of article 37 contained in Resolution CD-SIBOIF-266-2-OCTU27-2003, of October 27, 2003; h) Reform of article 45 contained in Resolution CD-SIBOIF-283-1-FEB12-2004, of February 12, 2004; i) Reform of article 4 contained in Resolution CD-SIBOIF-285-1-MAR1-2004, of March 1, 2004; j) Reform of article 5 contained in Resolution CD-SIBOIF-296-1-MAY12-2004, of May 12, 2004; k) Reform of articles 10 and 31 contained in Resolution CD-SIBOIF-318-2-OCTU6-2004, of October 6, 2004;
37 Art. 53, amended on September 19, 2008 - Resolution CD-SIBOIF-552-1-SEP19-2008
l) Reform of article 45 contained in Resolution CD-SIBOIF-328-1-NOV24-2004, of November 24, 2004; m) Reform of articles 6, 10, 31, and 37 contained in Resolution CD-SIBOIF-369-1-Agos3-2005, of August 3, 2005; n) Reform of article 7 contained in Resolution CD-SIBOIF-515-1-DIC17-2007, of December 17, 2007 Art. 54 Validity.- This norm shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Journal.
ANNEX 1 38
MINIMUM INFORMATION THAT MUST BE CONTAINED IN THE CREDIT FILES OF THE DEBTOR CUSTOMERS OF THE INSTITUTION Financial institutions will maintain individually updated credit files for each of their debtors, whether managed physically and/or electronically, with sufficient documentation and information for the adequate management of the portfolio and to support the process of qualification and control of risk assets, which must include the credit proposal submitted to the decision-making bodies (credit committee), as well as the resolution exposing the conditions required by said committee or board of directors. In the event that the file is managed electronically, the institution must provide the inspection teams with the facilities required to access the technological platform.
I. LEGAL AND ECONOMIC FINANCIAL INFORMATION
A) HOUSING MORTGAGE CREDITS, CONSUMER CREDITS AND JOINT AND SEVERAL GUARANTORS
1) Basic information of the debtor (name, address, phone, identity card, profession or trade, workplace, position).
2) Payroll statements or source of income with the corresponding backing for independent workers or employers.
3) Statement of economic situation or wealth declaration.
4) Appraisals of the offered guarantees.
38 Annex 1, amended by Resolution CD-SIBOIF-1087-2-DIC4-2018, of December 4, 2018
Annex 1, amended by Resolution SIB-OIF-XXV-130-2017, of March 16, 2017
5) Freedom from encumbrances.
6) Evidence of having consulted the Risk Central of the Superintendency.
B) MICROCREDIT AND SME CREDIT GRANTED IN NATIONAL OR FOREIGN CURRENCY FOR AMOUNTS EQUAL TO OR LESS THAN THE EQUIVALENT OF ONE HUNDRED THOUSAND DOLLARS
1) Home and business address, in the latter case when applicable, including identity documents, evidenced by the financial institution.
2) The client's activity and their position in the market they serve, evidenced by the financial institution, evaluating the business risk and its family environment.
3) Business operation history and experience in the business.
4) Source of income with corresponding backing, if any, evidenced by the financial institution (For example, monthly sales detail).
5) Financial statements (balance sheet and income statement) and projected cash flows based on the requested term and payment method, which must include debts with the Financial System and supported by their respective calculation memos), preferably prepared by an authorized public accountant or, in their absence, prepared by the credit analyst of the financial institution, which evidences the debtor's equity and payment capacity.
6) Payment history of debts with suppliers and other creditors.
7) Credit application which must state, at least, the amount, term, and payment method.
8) Documentation stating that real guarantees are perfected and adequately valued, when applicable.
9) Evidence of having consulted the Risk Central of the Superintendency.
10) Reports of visits to the debtor's business carried out by the credit analyst, supervisor, and/or recovery personnel of the financial institution.
C) COMMERCIAL CREDITS GRANTED IN NATIONAL OR FOREIGN CURRENCY FOR AMOUNTS GREATER THAN THE EQUIVALENT OF ONE HUNDRED THOUSAND DOLLARS
1) Natural Persons:
a) Basic debtor information (name, address, phone, identity card, profession or trade, activity). b) Financial statements:
i. Certified by an authorized public accountant (CPA) for credits granted in national or foreign currency for amounts equal to or greater than the equivalent of three hundred thousand (US$300,000.00) up to seven hundred fifty thousand dollars (US$750,000.00).
ii. Audited for credits granted in national or foreign currency for amounts greater than the equivalent of seven hundred fifty thousand dollars (US$750,000.00).
c) Projected cash flow based on the requested term and payment method, which must include debts with the Financial System and supported by their respective calculation memos. d) Appraisals of the offered guarantees. e) Freedom from encumbrances of the offered guarantees. f) Inspection and verification reports carried out by the financial institution, both of the business's operability and of the offered guarantees. g) Economic-financial evaluation of the project or activity to be financed. h) Technical reports on production, costs, sales, prices, as applicable, but duly substantiated.
i) Evidence of having consulted the Risk Central of the Superintendency.
2) Legal Persons
a) Deed of incorporation, bylaws of the company, and last amendment to the bylaws, if any. b) Powers of administration and general powers of law of the representatives. c) Shareholder certification. d) Board of directors certification. e) Detail of main company officials (including Internal Auditor). f) Shareholding participation of shareholders, executives, and officials in other companies. g) Business registration and RUC No. h) Copy of the income tax declaration for the last fiscal year. i) Most recent financial statements and for the last two fiscal periods.
i. Balance Sheet.
ii. Income Statement.
iii. Projected cash flow based on the requested term and payment method, which must include debts with the Financial System and supported by their respective calculation memos.
iv. Financial statements:
iv.1. Certified by an authorized public accountant (CPA) for credits granted in national or foreign currency for amounts equal to or greater than the equivalent of three hundred thousand (US$300,000.00) up to seven hundred fifty thousand dollars (US$750,000.00).
iv.2. Audited for credits granted in national or foreign currency for amounts greater than the equivalent of seven hundred fifty thousand dollars (US$750,000.00). j) Appraisals of the offered guarantees. k) Evidence of having consulted the Risk Central of the Superintendency. l) Freedom from encumbrances of the offered guarantees. m) Inspection and verification reports carried out by the financial institution, both of the company's operability and of the offered guarantees. n) Economic-financial evaluation of the project to be financed. o) Technical reports on production, costs, sales, prices, as applicable, duly substantiated. p) To analyze the economic-financial situation, depending on the industry, among others, the following indicators will be used:
i. Operating profit / sales.
ii. Net profit / total assets.
iii. Net profit / equity.
iv. Current assets / current liabilities.
v. Current assets - inventory / current liabilities.
vi. Working capital = current assets – current liabilities.
vii. Total liabilities / equity.
viii. Current liabilities / long-term debt.
ix. Historical operating cash flow / debt service.
x. Historical operating cash flow / current liabilities.
xi. Inventory turnover.
xii. Accounts payable turnover.
xiii. Accounts receivable turnover.
II. INFORMATION RELATIVE TO GUARANTEES
In the case of credit assets with real guarantees constituted on real estate properties, financial institutions must maintain, at a minimum, the following documentation in their respective files:
1) Freedom from encumbrances.
2) Copy of the public deed of ownership.
3) Appraisals and reports updating the same.
4) Evidence of registration of the guarantee or of the payment slip for its registration.
5) Photocopy of valid insurance policies, with the conditions and coverages that have been required, when applicable, as well as the assignment of policy rights.
III. OTHER INFORMATION
1) Credit application.
2) Credit contract or credit instrument with executive force.
3) Credit viability study carried out on the debtor, which served as the basis for credit approval, which must include at least, analysis of payment capacity and financial situation, debtor's payment behavior, clear identification of the use of funds and original sources of repayment.
4) Credit approval resolution.
5) Correspondence sent and received, which must be archived in chronological and ascending order with respect to the date.
6) In the case of agricultural credits, as applicable:
a) Sales Letter.
b) Marking minutes. c) Final harvest receipts. d) Price fixing contracts. e) Cost structure. f) Harvest inspection reports.
7) In the case of credits for the construction sector, the file must contain:
a) The necessary permits for the realization of the project, such as: (cite the different permits required for the development of the project and the entity that issues them). b) Progress reports of the work related to credit disbursements. c) Pre-sale and reservation reports for housing, when applicable.
8) For the case of institutions that carry out financial leasing operations, the information on client position and credit officer reports must include the following data:
a) Identification of the leased asset. b) Cost and location of the asset. c) Amount recorded in books, depreciation rates, and residual value. d) Amount assigned of rentals.
9) For credit assets in the process of judicial collection:
a) Certificate of delivery of documentation and/or file by the lawyer in charge of the judicial collection process. b) Photocopy of the complaint presented by the lawyer before the corresponding courts, with its respective stamp and signature of receipt.
c) Detailed report by a lawyer on the status of the process, which allows evaluating the recoverability of the credit asset. Such report must be updated annually.
10) Permanent reports that evidence, among other aspects, the following:
a) Compliance with the general conditions of the credit or operation and evaluation of the purpose of each loan or operation, as a basis for determining its repayment. b) Exposure to tax and legal aspects that affect the debtor's position. c) General economic conditions of the sector and region in which the debtor operates. d) Considerations on more important competitors and position in the competitive market. e) Administrative and organizational capacity of the debtor. f) Status of actions taken to ensure the recovery of credits or installments that are overdue or in judicial collection.
IV. PARTS THAT MAKE UP THE DEBTOR'S CREDIT FILE
1) General information.
2) Legal documentation.
3) Financial statements and credit application.
4) Guarantees, registrations, appraisals, and inspections.
5) Debtor's history and documentation related to payment capacity.
6) Proposal for credit approval and authorization.
7) Restructurings and extensions.
8) Inspection and/or monitoring reports.
9) Debtor evaluation form.
V. INFORMATION THAT MUST BE CONTAINED IN THE FILE OF ASSETS RECEIVED IN PAYMENT
1) Authorization from the instance or official authorized to receive the asset received in credit recovery, expressly approved by the board of directors.
2) Loan statement before and after its settlement.
3) Risk category of the settled loan.
4) Accounting balances of the settled loan including: outstanding capital, interest recorded in asset accounts, sanitation reserves, and interest recorded in off-balance sheet accounts, including references to cancelled credits and the names of the debtors.
5) Copies of invoices or fiscal credits and checks for payments to third parties for fees, registration rights, transfer taxes, and other expenses related to the acquisition of the asset.
6) Judge's sentence of the public auction, or the deed of adjudication or the deed of dation in payment, as applicable.
7) Asset valuation report issued by an authorized appraiser when applicable.
8) Accounting records on the acquisition of the asset, the fair value of the asset, the constitution of reserves, the settlement of the asset, and the accounting records related to the asset received in payment.
9) In cases where the loan settlement had been partial, document the outstanding balance and support the policy to be followed regarding said balance.
10) Marketing efforts carried out by the entity.
11) Publication of auctions.
12) Purchase offers presented by clients and justification of the entity regarding its resolution.
13) Minutes on the holding of the auction.
14) Copy of the check received for the sale of the asset if it was for cash; or copy of the notarial document when the sale is with financing.
15) Notarial documents and accounting entries supporting the partial sale of the asset.
16) Point of the board of directors' minutes where an extension of time for assets received in credit recovery is requested, when they exceed two years, where it is recorded that the board of directors approves and requests the SIBOIF for the time extension; as well as, the response of said regulatory entity to said request.
ANNEX 2-A 39
RELATED PARTIES (NATURAL PERSON DEBTOR)
Financial Institution: ________________________ Date of this Report: _______________ Debtor: __________________________ Position: ________________ Date of Birth: _________________________ ID No. 3/: ________________ Natural Persons Degree and nature of link First Name 1/ Second Name 1/ First Surname 1/ Second Surname 1/ Date of Birth 2/ ID Card 3/ Country of Residence 4/ Observations Indicate link with Legal Person 5/ Grandparents Parents Siblings Spouse Children Grandchildren Spouse's Grandparents In-laws
39 Annex 2-A, modified by Resolution SIB-OIF-XXV-130-2017, of March 16, 2017
Brothers-in-law
Son-in-law/Daughter-in-law
Spouse of Grandchild
Debtor's Name and Signature
Information that must be provided about persons related to the debtor:
1/ Do not abbreviate or omit names and surnames. Married surnames should not be included unless according to a legal requirement the substitution of the maiden surname for the married surname is mandatory, in which cases it must be explicitly clarified. In cases where the person does not have a second name or second surname, it must be clearly indicated "Does not have". 2/ Birth dates must be indicated in all cases, even of minors, in a uniform format (Example: day – month – year) 3/ In the case of Nicaraguan citizens, indicate the number of the identity card issued by the Supreme Electoral Council; for foreigners residing in Nicaragua, they must indicate the number of the residence card registration issued by the General Directorate of Migration and Foreigners, and in cases where the reported persons reside outside Nicaragua, the passport number and country of residence must be indicated. In all cases, as established in article 55 of the Banking Law, relatives up to the second degree of consanguinity and second degree of affinity must be reported, as detailed in this annex. When any of the mentioned links do not exist, it must be clearly indicated: "Does not have". Cases of deceased persons, minors, or others must be clearly indicated. 4/ The country where the related person is domiciled must be indicated. 5/ Indicate if they have or do not have a link with a legal person. If positive, fill out annex 2-B.
ANNEX 2-B 40
RELATED PARTIES (NATURAL PERSON DEBTOR)
Financial Institution: ________________________ Date of this report: ___________ Debtor 1/: _________________________ Position: __________________ Date of Birth: _________________________ ID No. 2/: ________________ Legal Persons Entity Name Type and No. of Identification Type of Link % of Shareholding Participation Position Held in the Entity Country of Residence Observations
40 Annex 2-B, modified by Resolution SIB-OIF-XXV-130-2017, of March 16, 2017
Debtor's Name and Signature
1/ This annex must be presented for each debtor; as well as, for the natural persons that make up their interest unit, described in annex 2-A.
2/ In the case of Nicaraguan citizens, indicate the number of the identity card issued by the Supreme Electoral Council; for foreigners residing in Nicaragua, they must indicate the number of the residence card registration issued by the General Directorate of Migration and Foreigners, and in cases where the reported persons reside outside Nicaragua, the passport number and country of residence must be indicated. Information that must be provided about related legal persons:
Entity Name: Indicates the trade name of the legal person, national or foreign.
Identification Type: Corresponds to specifying the type of document to which the identification number used by the legal person, national or foreign, corresponds. ID No.: Corresponds to indicating the number of the Single Taxpayer Registry (RUC) or similar. Type of Link: Must specify the type of link that the natural person has with the legal person, according to the criteria established in article 55 of the General Banking Law and in the regulations governing the matter on Concentration Limits. If the link is shareholding, the percentage of participation must be specified in the following column. % of Shareholding Participation: Indicates the number expressed in percentage, of participation that the related related party detailed in annex 2-A, has in the entity to be detailed. Position held in the entity: Corresponds to the name of the position held by the related party, within the entity to be detailed. In the case that they do not hold any position, they must express in quotes: "N/A" (NOT APPLICABLE) Country of Residence: The country in which the entity is domiciled will be specified.
ANNEX 2-C 41
RELATED PARTIES (LEGAL PERSON DEBTOR)
Financial Institution: ________________________ Date of this report: _____________ Debtor 1/: _________________________ Registry Data: _________________________ RUC 2/: ________________
41 Annex 2-C, added by Resolution SIB-OIF-XXV-130-2017, of March 16, 2017
Name Type and No. of
Identification
Type of
Link
% of
Shareholding
Participation
Position Held in the
Entity
Country of
Residence
Observations
Debtor's representative's Name and Signature
1/ This annex must be presented for each legal person.
2/ Indicate number of the Single Taxpayer Registry (RUC) or similar.
Information that must be provided about related legal persons:
Name: Name of the natural or legal person that has significant linkage with the debtor in accordance with what is established in numeral 2, both of article 55 and of article 56 of the General Banking Law. Identification Type: Corresponds to specifying the type of document to which the identification number used by the natural or legal person corresponds. ID No.: In the case of Nicaraguan citizens, indicate the number of the identity card issued by the Supreme Electoral Council; for foreigners residing in Nicaragua, they must indicate the number of the residence card registration issued by the General Directorate of Migration, Foreigners, and in cases where the reported persons reside outside Nicaragua, the passport number and country of residence must be indicated, and in the case of a legal person, the RUC number or its equivalent. Type of Link: Must specify the type of link that the natural or legal person has with the debtor, according to the criteria established in article 55 of the General Banking Law and in the regulations governing the matter on Concentration Limits. If the link is shareholding, the percentage of participation must be specified in the following column. % of Shareholding Participation: Indicates the number expressed in percentage, of participation of the shareholder, natural or legal person. Position held in the entity: Corresponds to the name of the position held by the related party within the entity to be detailed. In the case that they do not hold any position, they must express in quotes: "N/A" (NOT APPLICABLE) Country of Residence: The country in which the natural or legal person is domiciled will be specified. (f) Antenor Rosales B. (f) V. Molina H. (f) Gabriel Pasos Lacayo (f) Roberto Solórzano Ch. (f) A. Cuadra G. (f) U. Cerna B. URIEL CERNA BARQUERO Secretary of the SIBOIF Board of Directors
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Lineage: Amended
A newer document in RegAlert amends this one; it applies as amended.
The links and the sentences they come from (19)
- Supersedes
- Resolution No. CD-SIB-185-2-Nov9-2001 dated 2001-11-09Not in RegAlert
“the Prudential Norm on Evaluation and Classification of Assets, contained in Resolution CD-SIB-185-2-Nov9-2001... are repealed”
- Amended by
“Article 51 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008... is hereby amended”
“Articles 1, 21, 39, 40, 41, 42 and 47 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008... are hereby amended”
“Add article 52-bis to the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008”
“FIRST: Articles 5, 14, 23, and 27 of the Credit Risk Management Standard, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008”
“Article 50 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008... is hereby amended”
“That it is necessary to reform Articles 24 and 29 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008”
+12 more
“FIRST: Articles 5, 14, 23 and 27 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008... are hereby reformed”
“Articles 16, 22, 24, and 29 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008... are hereby amended”
“Reform article 24 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of 20 August 2008”
- Norm Amending Articles 14, 23 and 27 and Repealing Article 10 of the Norm on Credit Risk Management2011 · SIBOIF
“Articles 14, 23 and 27 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of 20 August 2008... are hereby amended”
“Articles 23 and 27 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008, are hereby amended”
“First: Amend articles 42 and 47 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008”
- Standard for the Reform of Articles 34, 35, 36, 37, 38, 40 and 41 of the Standard on Credit Risk Management2010 · SIBOIF
“Reform articles 34, 35, 36, 37, 38, 40 and 41 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF- 547-1-AGOST20-2008, dated 20 August 2008”
- Standard for the Reform of Articles 11, 15 and 47 of the Standard on Credit Risk Management2009 · SIBOIF
“Articles 11, 15 and 47 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008, are hereby reformed”
“Reform article 51 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008”
- Rule Amending Articles 18, 19, 39, 40, 41, 42, 43, 44 and 45 of the Rule on Credit Risk Management2009 · SIBOIF
“Articles 18, 19, 39, 40, 41, 42, 43, 44 and 45 of the Rule on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008, are hereby amended”
- Standard Reforming Articles 1, 6, 11, 18, 19, 51 and 52 of the Standard on Credit Risk Management2009 · SIBOIF
“Reform articles 1, 6, 11, 18, 19, 51 and 52 of the Standard on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, dated 20 August 2008”
“contained in Resolution CD-SIBOIF-547-1-AGOST20-2008, which shall read as follows: g) In special circumstances, entities may request from the Superintendent of Banks specific exceptions”
Mentions (2): 2 documents mention this one without changing it
- Referred to by
“The provisions of the “Standard on Credit Risk Management”, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008 and its updates”
“Norm on Credit Risk Management: Resolution No. CD-SIBOIF-547-1-AGOST20-2008, published in La Gaceta No. 176 and 178 on September 11 and 17, 2008, and its successors.”
Timeline
Amended 18 times · last 2019-08-27
- 2019-08-27
SIBOIFNorm on Reform to Article 51 of the Credit Risk Management Standardamends
- 2018-12-04
- 2018-10-25
- 2017-12-04
- 2017-03-05
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