Norm on Reform to Article 4 of the Capital Adequacy Standard

RESOLUTION CDMF-XXV-1-25
Dated July 16, 2025

NORM ON REFORM TO ARTICLE 4 OF THE CAPITAL ADEQUACY STANDARD

The Monetary and Financial Board,

CONSIDERING

I
That on October 27, 2010, the "Norm on Capital Adequacy," contained in Resolution No. CD-SIBOIF-651-1-OCTU27-2010, was approved, published in La Gaceta, Official Gazette No. 18, on January 28, 2011.

II
That Law No. 1237, "Law of Reforms and Additions to Law No. 561, General Law of Banks, Non-Banking Financial Institutions and Financial Groups," entered into force, published in La Gaceta, Official Gazette No. 37, on February 25, 2025 (hereinafter Law No. 1237).

III
That it is necessary to reform Article 4 of the "Norm on Capital Adequacy," in order to adjust the maximum limit of secondary capital and subordinated debt applicable to the calculation of capital adequacy, to what is established in Article 20 of Law No. 561, "General Law of Banks, Non-Banking Financial Institutions and Financial Groups," reformed by said Law No. 1237.

IV
That in accordance with the considerations set forth above and based on the authority granted by Article 17, subsection "A", items 1) and 3) and subsection "C", items 1) and 6) of Law No. 1232 "Law on Administration of the Monetary and Financial System," published in La Gaceta, Official Gazette No. 241, on December 30, 2024.

In exercise of its powers,

HAS ISSUED

The following:

NORM ON REFORM TO ARTICLE 4 OF THE CAPITAL ADEQUACY STANDARD

FIRST: Article 4 of the "Norm on Capital Adequacy," contained in Resolution No. CD-SIBOIF-651-1-OCTU27-2010, of October 27, 2010, published in La Gaceta, Official Gazette No. 18, on January 28, 2011, and its reforms, shall be amended to read as follows:

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

A. Donations and other non-capitalizable contributions available to cover losses of the financial institution; which may not be reimbursed under any concept.
B. Other Equity Reserves;
C. Accumulated Results from Previous Periods that do not qualify as primary capital;
D. Results of the Current Period;
E. Cumulative Preferred Shares and other hybrid capital instruments that meet the following characteristics:

1. Unsecured (not guaranteed), subordinated and fully paid;
2. Of a permanent nature (no maturity), or with maturity and a mandatory conversion clause to ordinary capital;
3. Not redeemable at the holder's option or redeemable with prior authorization of the Superintendent;
4. Available to cover losses of the financial institution;
5. When the instrument contains a mandatory payment clause for yield, it must allow for deferral in case the financial institution's profitability does not allow for payment.
6. There are no clauses for early payment in case of deterioration in the credit quality of the institution.
7. Not financed, directly or indirectly, by the institution for the purchase of the instrument.
8. There are no accelerated amortization clauses (step up) or other incentives for early amortization.
9. The instrument may not be purchased by the institution or by any related party in which it controls or exercises dominant influence.
10. The instrument may be purchased by investors, in amounts not less than the equivalent in national currency to fifty thousand dollars (US$50,000.00).

When the financial institution incurs in any of the situations that warrant the application of preventive measures as established in the General Law of Banks, the Superintendent may order the financial institution to immediately capitalize, or in its absence, suspend the payment of interest on the hybrid capital instruments referred to in this subsection, while the circumstances that gave rise to the order persist. For such purposes, the contracts of said instruments to be considered as secondary capital must incorporate a clause authorizing the Superintendent to execute the aforementioned.

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

1. Unsecured (not guaranteed), subordinated and fully paid;
2. With original maturity terms greater than five years; and
3. Not mandatorily convertible to ordinary capital.
4. There are no clauses for early payment in case of deterioration in the credit quality of the institution;
5. Not financed directly or indirectly by the institution for the purchase of the instrument;
6. The instrument may not be purchased by the institution or by any related party in which it controls or exercises dominant influence;
7. There are no accelerated amortization clauses (step up) or other incentives for early amortization;
8. The instrument may be purchased by investors, in amounts not less than the equivalent in national currency to fifty thousand dollars (US$50,000.00).

The instruments referred to in this subsection may not exceed one third (1/3) of the amount considered as secondary capital. Likewise, during the last five years prior to the maturity of said instruments, only the following percentages may be recognized as part of secondary capital:

When the financial institution incurs in any of the situations that warrant the application of preventive measures as established in the General Law of Banks, the Superintendent may order the financial institution to immediately capitalize, or in its absence, suspend the payment of interest on the term subordinated debt referred to in this subsection, while the circumstances that gave rise to the order persist. For such purposes, the contracts of said instruments to be considered as secondary capital must incorporate a clause authorizing the Superintendent to execute the aforementioned.

The capitalization of the term subordinated debt referred to in this subsection, borne by the debtor financial institutions that incur in any of the situations that warrant the application of preventive measures

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

established in the General Law of Banks, shall not be applicable to those multilateral financial entities, except for the suspension of interest payments.

G. Generic Provisions:
a. Voluntary generic provisions: Refers to credit provisions constituted by the financial institution voluntarily to cover unidentified losses. For the purposes of calculating secondary capital, these generic provisions may not exceed 1.25% of the total risk-weighted assets. b. Countercyclical Provision Fund: Refers to the countercyclical provision fund constituted by the financial institution, in accordance with the Norm on Constitution of Countercyclical Provisions.

In accordance with Article 20 of the General Law of Banks, the secondary capital to be considered in the capital base may never be greater than one third (1/3) of the amount of primary capital thereof. Additionally, the positive balance generated from the Other Comprehensive Net Income account as part of the financial institution's equity, shall not count as part of secondary capital.

SECOND: This norm shall enter into force upon notification by the Superintendence of Banks and Other Financial Institutions. Publish on the website of the Superintendence.

(f) legible, Ovidio Reyes R. President of the Board; (f) Illegible, Luis Ángel Montenegro Espinoza, Vice President of the Board; (f) Illegible, Bruno Gallardo, Minister of Finance, Owner Member; (f) illegible, Roberto Rivas, Non-executive Owner Member; (f) Illegible, Hugo Ortega, Non-executive Owner Member. (End of the Resolution text). (f) Illegible, Ruth Elizabeth Rojas Mercado, Secretary of the Board.