Norm on Deferral of Capital Gains Arising from Renegotiations of CENIs Issued by the Central Bank of Nicaragua

NORM ON DEFERRAL OF CAPITAL GAINS ARISING FROM RENEGOTIATIONS OF CENIs

The Board of Directors, after analyzing the content of the consultation presented by the Superintendent of Banks by Law, Lic. Alfonso J. Llanes, and the deliberations regarding the same,

CONSIDERING

I

That currently, the Central Bank of Nicaragua, within the strategic plans of the country, is in the process of renegotiating with commercial banks the internal debt resulting from CENIs, which were issued to cover the gap that originated between assets acquired and liabilities assumed by banking entities subject to intervention and forced liquidation measures, which were transferred to other national banking entities;

II

That, upon liquidating the aforementioned CENIs, discounting the cash flows at a rate representative of the market, it is considered that there is a possibility that income which has not yet been accrued will be generated, and consequently, such income should be deferred over time, taking into account that the liquidation occurs through the issuance of other securities with longer maturities rather than in cash;

III

That, in resolution CD-SIBOIF-203-1-MAY10-2002 and its reform contained in resolution CD-SIBOIF-220-2-SEP11-2002, published in the Official Gazette No. 102 and 185, dated June 3 and October 1, 2002, respectively; the valuation method "Amortized Cost" was defined for debt securities in which i) there is an intention to hold them until maturity or ii) there is no quoted price in an active and liquid market, and whose fair value cannot be reliably measured using the valuation criteria contemplated for Temporary Investments;

THEREFORE

In accordance with what is established in Article No. 10, items 1 and 8 of Law 316, Law of the Superintendence of Banks and Other Financial Institutions,

RESOLVES

CD-SIBOIF-253-1-AGOT7-2003

To issue with general character, the Norm on Deferral of Capital Gains Arising from Renegotiations of CENIs Issued by the Central Bank of Nicaragua, and Exception to the Accounting of Investment Yields from Long-Term Investments Coming from These Titles, according to the following terms:

First: The unaccrued income (Capital Gain) generated from the liquidation of the CENIs referred to in this resolution, must be registered as a liability of the institution in the accounting account "252.01 Deferred Financial Income"; which, in turn, must be amortized in the income statement account "451.99 Other Extraordinary Income" within the period specified below:

Period % Amortization July to December 2003 32.37% Year 2004 45.49% Year 2005 19.79% Year 2006 1.47% Year 2007 0.88%

Second: The yields generated from the titles mentioned in this present resolution, whose amortization periodicity for principal and interest is greater than one year, may be subject to the straight-line method for the calculation of said yields.

Third: This resolution will enter into force from its notification, without prejudice to its publication in the Official Gazette.