Norm on Reform to Articles 24 and 29 of the Credit Risk Management Standard

Resolution No. CD-SIBOIF-933-1-MAR15-2016 Date: March 15, 2016

NORM ON REFORM TO ARTICLES 24 AND 29 OF THE CREDIT RISK MANAGEMENT STANDARD

The Board of Directors of the Superintendence of Banks and Other Financial Institutions, after deliberations on the matter,

CONSIDERING

I

That Article 10, numeral 7) of Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; empowers the Board of Directors of the Superintendence of Banks and Other Financial Institutions to issue general norms intended to establish the general criteria for the evaluation and classification of assets and the guidelines for the establishment of reserves and provisions.

II

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, published in La Gaceta, Official Journal No. 176 and 178, of September 11 and 17, 2008, since it is required to adapt them to the provisions contained in Law No. 853, Law for the Transformation and Development of Coffee Growing, and its reform, published in the Gaceta, Official Journal No. 145, of August 4, 2014, specifically regarding the inclusion as liquid guarantee for purposes of establishing provisions, the "Certificates of Credits for the Transformation of Coffee Growing (CCTC)", which, in accordance with the aforementioned Law, will have coverage of up to 30% for each of the credits destined for the rehabilitation and renewal of coffee growing, with a maximum of Ten Thousand United States Dollars (US$ 10,000.00) per producer.

III

That in accordance with the considerations stated above and in accordance with what is established in Article 3, numerals 3 and 13, of Law 316 referred to above, and its reforms.

In exercise of its powers,

HAS ISSUED

The following,

CD-SIBOIF-933-1-MAR15-2016 NORM ON REFORM TO ARTICLES 24 AND 29 OF THE CREDIT RISK MANAGEMENT STANDARD

FIRST: Articles 24 and 29 of the Norm on Credit Risk Management, contained in Resolution No. CD-SIBOIF-547-1-AGOST20-2008, of August 20, 2008, published in La Gaceta, Official Journal No. 176 and 178, of September 11 and 17, 2008, are reformed, which shall read as follows:

"Art. 24 Maximum value applicable to eligible liquid guarantees as risk mitigants. The maximum value applicable to eligible liquid guarantees as risk mitigants shall be the following:

ELIGIBLE GUARANTEE AS RISK MITIGANT VALUATION MAXIMUM VALUE APPLICABLE State Securities Market Value 100% Time deposit certificates, bank guarantees, sureties, Stand By letters of credit and any other liquid instrument, backed, accepted or guaranteed by financial institutions of the country. Nominal Value 100% Time deposit certificates, bank guarantees, sureties, Stand By letters of credit and any other liquid instrument, backed, accepted or guaranteed, including guarantee funds, by foreign financial institutions qualified as first-class. Nominal Value 100% Securities (Bonds, commercial paper and shares) issued by foreign financial institutions with dispersed share capital whose shares are traded on a stock exchange or regulated market and are qualified as first-class. Market Value

1. 80% fixed income
2. 70% variable income Securities issued by the central bank or ministry of finance of States with first-class country risk rating. Market Value 90%

In the case that a certain security does not have an active and liquid market, the valuation shall be determined in accordance with what is established in the regulations governing the matter of portfolio valuation.

Art. 29 Liquid Guarantees. The following are considered liquid or quickly realizable guarantees:

a) The following are considered liquid guarantees, those that meet all and each of the following requirements:

1. Allow for the rapid realization of the guarantee in cash, with which the guaranteed obligation can be paid in full or in part, without significant costs;
2. Have adequate legal documentation;
3. Do not have prior obligations that could diminish their value or in any way prevent the financial institution from acquiring clear title;
4. Their value is permanently updated.

b) The following are accepted as liquid guarantees, among others:

1. State Securities: 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 sureties.

2. Instruments issued by the same financial institution: Time deposit certificates.

3. Instruments issued by financial institutions of the country: Time deposit certificates, guarantees, sureties, 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 met the minimum required coefficient in accordance with the regulations governing the matter on capital adequacy, have not shown operational losses nor have been subject to a fine for mismatch. Securities of debt and capital of companies with dispersed share capital whose shares are traded on a stock exchange or regulated market and that such issuances are qualified as first-class investments. Market Value

4. 80% fixed income

5. 70% variable income Certificates of Credit for the Transformation of Coffee Growing (CCTC), governed by Law No. 853, Law for the Transformation and Development of Coffee Growing, and its reforms. Nominal Value 100%

6. Instruments issued by foreign financial institutions: Time deposit certificates, guarantees, sureties, Stand By letters of credit and any other liquid instrument, backed, accepted, guaranteed or guaranteed, including guarantee funds, by Financial Institutions qualified as first-class in accordance with the regulations governing the matter on deposit and investment limits.

7. Debt and share securities of foreign financial institutions: Securities (Bonds, commercial paper, and shares) issued by banks and foreign financial institutions with dispersed share capital whose shares are traded on a stock exchange or regulated market and are qualified as first-class institutions in accordance with the regulations governing the matter on deposit and investment limits.

8. Securities issued and/or guaranteed by States with first-class country risk rating.

9. Securities issued by first-class foreign companies: Debt and capital securities of companies with dispersed share capital whose shares are traded on a stock exchange or regulated market and that such issuances are qualified as first-class investments in accordance with the regulations governing the matter on deposit and investment limits.

10. Certificates of Credits for the Transformation of Coffee Growing (CCTC), backed by the Trust of the Fund for the Transformation and Development of Coffee Growing (FTDC) administered by the Production Development Bank; which will have coverage of up to thirty percent for each of the credits for rehabilitation and renewal, 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 Growing, and its reforms."

SECOND: This norm shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Journal. (f) S. Rosales C. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Fausto Reyes B. (f) illegible (Silvio Moisés Casco Marenco) (f) illegible (Freddy José Blandón Argeñal) (f) Antonio Morgan Pérez. Ad Hoc Secretary"

URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF