Norm on the Payment of Bonuses in Financial Institutions

RESOLUTION No. CD-SIBOIF-655-2-NOV24-2010
Dated November 24, 2010
NORM ON THE PAYMENT OF BONUSES IN FINANCIAL INSTITUTIONS The Board of Directors of the Superintendence of Banks and Other Financial Institutions, CONSIDERING I That items 7 and 8 of Article 40 of Law No. 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups, published in La Gaceta, Official Journal No. 232, of November 30, 2005, establish that the provisions regulating the corporate governance of financial institutions must include, among others, policies on mechanisms for the identification, measurement, monitoring, control and prevention of risks and policies for the management of conflicts of interest; as well as general salary policies and other benefits for workers. II That in accordance with the foregoing and based on the powers established in Article 3, item 13), and Article 10, clauses 1), 2) and 3) of Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions and its reforms. In exercise of its powers HAS ISSUED The following:
NORM ON THE PAYMENT OF BONUSES IN FINANCIAL INSTITUTIONS RESOLUTION No. CD-SIBOIF-655-2-NOV24-2010
CHAPTER I
GENERAL PROVISIONS

Art. 1. Concepts.-
1 For the purposes of application of the provisions contained in this norm, the concepts indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:
a) Bonus: Ordinary payments in cash, shares or options, in addition to the worker's salary or remuneration as a result of performance through the fulfillment of pre-established goals or objectives. Bonuses do not include commissions paid to stockbrokers or other perks, such as: health and life insurance payments, vehicle allocation, memberships, payment of children's education, among others. b) Workers: Those natural persons who maintain a labor relationship with the financial institution, who hold the positions of chief executive (Chief Executive Officer, General Manager or their equivalents) and persons at the next hierarchical level (Deputy General Manager, Manager or Deputy Area Manager, or their equivalents). Managers of branches and those non-risk takers, such as those in charge of risk management, compliance functions, audit, administration and operations are excepted from this definition. c) Financial institution: Banks and non-bank financial institutions subject to the supervision of the Superintendence of Banks and Other Financial Institutions. d) Superintendence: Superintendence of Banks and Other Financial Institutions. e) Superintendent: Superintendent of Banks and Other Financial Institutions. Art. 2. Object and scope.- 2 The object of this norm is to promote prudential bonus practices in financial institutions, so that they use appropriate economic incentives that do not increase the institution's risk profile. The provisions of this norm are applicable to the members of the boards of directors and workers of financial institutions.
CHAPTER II
CORPORATE GOVERNANCE ASPECTS

1 Art. 1, amended on May 9, 2014 – Resolution CD-SIBOIF-833-1-MAY9-2014 2 Art. 2, amended on May 9, 2014 – Resolution CD-SIBOIF-833-1-MAY9-2014

Art. 3. Responsibilities of the board of directors.- The board of directors of the institution must actively supervise the design and operation of bonus policies. To this end, the board of directors must comply with the following:
a) Approve the objectives, guidelines and policies governing the institution's bonus system. b) Evaluate the policies and practices on bonuses and the incentives created for the administration of risks, capital and liquidity, so that the aforementioned policies and incentives comply with the object and provisions of this norm. In fulfilling this function, its decisions must be consistent with the evaluation of the institution's financial situation and its future performance. c) Monitor and periodically evaluate the practical operation of the bonus system to ensure its compliance with policies and procedures. d) Work closely with the institution's risk committee in the evaluation of the incentives created by the bonus system, when the financial institution is required by law or regulation to constitute this committee. Art. 4. Minimum content of bonus policies.- The bonus policies referred to in the previous article must contain, at least, the aspects to be indicated below and must be applied at the individual and financial group level:
a) The decision-making process used to determine the bonus policy; indicating that, the bonuses of the workers must be approved by the board of directors.
Workers may access bonuses once a year, in consideration of their contributions and individual performance in the exercise of their position in accordance with the parameters established in this norm.
The payment of bonuses to the workers referred to in this norm must be made, if applicable, once the financial statements of the financial institution have been audited in accordance with the regulations governing external audit. The payment of bonuses to the members of the boards of directors of financial institutions is prohibited, as well as the use or implementation of other figures or modalities that aim to pay

3 Art. 4, amended on March 2, 2011 – Resolution CD-SIBOIF-667-1-MAR2-2011 Art. 4, amended on May 9, 2014 – Resolution CD-SIBOIF-833-1-MAY9-2014 Art. 4, amended on April 28, 2015 – Resolution CD-SIBOIF-887-2-ABR28-2015

benefits to the members of said boards of directors, who shall only have the right to the profits corresponding to them, if any, to the allowances and remunerations for their participation in board of directors sessions, and to the remunerations received for their work in the internal committees in which they participate. The criteria used to evaluate and measure performance and its risk adjustment, which shall contemplate, among others, the following:
i. The cost of capital required to support the risks assumed, from the point of view of the evaluation of profitability of equity;
ii. The evolution of asset quality over time and not only regarding aspects related to their placement;
iii. The cost of liquidity assumed in the development of the business or activity, from the point of view of the evaluation of the financial margin; and
iv. The evaluation of the profitability of assets, from the point of view of their evolution over time, in accordance with the goals established in operational plans.
b) Bonuses must be paid according to performance and the fulfillment of the global goals of the institution, of the business unit in particular and the individual goals of the worker. c) The link between payment and performance. d) Express prohibition of guaranteed bonuses, as these are not consistent with prudential risk management practices or the principle of payment for performance. e) Policy of deferral in the payment of bonuses and criteria for granting them, in cases where this form of payment is necessary to align the payment of the bonus with the nature of the business, its risks and the activities of the worker in question; as well as, to create incentives aligned with the creation of long-term value and the time horizons of risk. f) The parameters used to pay the bonus, whether in cash, shares or options. g) Bonuses must be sensitive to the worker's non-financial performance aspects. Misconduct (particularly unethical behavior and lack of compliance) must be sufficient to discredit good financial performance and reduce the bonus.

h) Both performance measures and risk adjustments must be adjusted to the level and responsibilities and to the compensation approach used.
The board of directors is obliged to require the general management to provide a report on bonuses paid. Likewise, the board of directors must present to the shareholders' meeting, in the annual report, a detail of the aforementioned aspects.
CHAPTER III
POWERS OF THE SUPERINTENDENT
Art. 6. Restriction in the payment of bonuses.- 4 The Superintendent, based on the knowledge he obtains about the situation of a financial institution, whether through inspections or through the analysis of the documentation and information available to him, without prejudice to the sanctions that correspond, according to the materiality or gravity of the case, may suspend or restrict the payment of bonuses in the following cases:
a) When acts or operations are carried out without the authorization of the Superintendent, when this is established by law or regulations, or without observing the conditions established in them. b) When transactions are made with related parties under preferential conditions or without complying with the legal and regulatory provisions established for this type of operations; or when there are undisclosed operations with related parties. c) Lack of minimum information that, in accordance with the law and relevant regulations, must be demanded from debtors, when such information has an impact on the determination of their payment capacity and/or the recoverability of the credit. d) When it is found that there are practices that undermine the independence that must exist between the bodies in charge of audit, internal control, compliance and risk management with respect to the other corporate and business instances of a particular institution. e) When it is determined that the policies, practices and procedures for granting, administering and controlling credits, insurance or securities intermediation do not comply with the applicable legal and regulatory provisions, according to the level of deficiencies found. f) When at the beginning of the on-site inspection visit the required information in the opening letter is not available.

4 Art. 6, amended on March 2, 2011 – Resolution CD-SIBOIF-667-1-MAR2-2011 Art. 6, amended on August 3, 2021 – Resolution CD-SIBOIF-1262-3-AGOS3-2021

g) When the financial institution does not comply with the provisions of this norm. h) When the financial institution is in a transitional regime regarding the constitution of provisions for any asset, that is, those to which the Superintendent has approved gradualness or deferral to create their provisions, whether they have resulted from their own calculations or from inspections. i) When the financial institution has pending to register adjustments ordered by the Superintendent, or determined by themselves, whether these are interests to be cleaned up or various accounts from the balance sheet. j) When the opinion of the external auditors regarding the audit performed at the end of the period includes qualifications that could affect the financial situation of the Institution. k) When the provisions contained in the laws, resolutions of the Board of Directors; as well as the orders or instructions issued by the Superintendent; or irregularities are detected in the functioning of an institution, or documents or reports are received from them that do not correspond to their true situation. l) When other situations arise that, in the opinion of the Superintendent, warrant restricting the payment of bonuses, when, in the judgment of said official and as a prudential measure, such payment could harm the stability or solidity of the Institution.
CHAPTER IV
FINAL PROVISIONS
Art. 7. Transitional.- Financial institutions will have up to three months counted from the entry into force of this norm to adjust their policies, procedures and systems for the payment of bonuses to the provisions of this norm. Art. 8. Validity.- This norm will enter into force from its notification, without prejudice to its publication in La Gaceta, Official Journal. (f) A. Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) F. Reyes B. (f) illegible (Silvio Moises Casco Marenco) (f) U. Cerna B. URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF