Norma de los Grupos Financieros

NORMA DE LOS GRUPOS FINANCIEROS
Resolution No. CD-SIBOIF-516-1-ENE9-2008
Dated January 9, 2008

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

That Article 135 of Law 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups (General Law of Banks) establishes that financial groups must be constituted in accordance with what is indicated in Title V of the aforementioned law and by what is stated by the norms issued by the Board of Directors of the Superintendence of Banks and Other Financial Institutions (Board of Directors);

That, Article 140 establishes that the Board of Directors is empowered to issue the general norms it deems necessary for the Superintendent of Banks and Other Financial Institutions to be able to carry out the consolidated supervision of financial groups in an effective manner, among which are the requirements for the constitution, operation, responsibilities and obligations of shareholding companies or responsible companies.

III

That, the consolidated supervision of Financial Groups is aimed, among other things, at preventing and detecting situations of double or multiple capital registration, excessive leverage, contagion risk, conflicts of interest and also promoting the transparency of operations that exist among the members of a Financial Group; supervision whose ultimate goal is to protect the interests of those who entrust their resources to the member entities of the group;

That, in order to ensure that the risks assumed by a Financial Group are always covered with a minimum level of own resources, it is necessary to establish provisions that allow valuing its patrimonial position in a consolidated manner, through the calculation of the surplus (or deficit) of consolidated capital of the financial group;

In exercise of its powers,

HAS ISSUED

The following,

NORMA DE LOS GRUPOS FINANCIEROS
Resolution No. CD-SIBOIF-516-1-ENE9-2008

CHAPTER I
CONCEPTS, OBJECT AND SCOPE

Art. 1. Concepts.- 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, shall have the following meanings:

a. Board of Directors: Board of Directors of the Superintendence of Banks and Other Financial Institutions. b. Days: Calendar days.
c. Financial institution: Banks, non-bank financial institutions and special regime financial companies supervised by the Superintendence of Banks and Other Financial Institutions or by the corresponding foreign supervisory body.
d. General Law of Banks: Law 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups, published in La Gaceta, Official Diary, number 232, of November 30, 2005. e. Indirect manifestations: As indicated in item 3 of Article 55 of the General Law of Banks and the regulations on concentration limits, in cases where this norm makes references to control, relationships, participations, means and any other manifestation of an indirect nature, it must be understood that such manifestations refer to situations where the celebration of acts or contracts, the existence of facts or the intervention of third parties are evidenced, which produce effects equivalent to those that would be produced directly. These manifestations admit proof to the contrary.

f. Subsidiary: It is an entity controlled by another called controlling or parent company. g. Controlling company: Responsible company or shareholding company, whether domiciled in Nicaragua or not, when such institutions control, directly or indirectly, the majority of the shares with voting rights of financial institutions and/or any other form of manifestation of control of the majority of the shares of another financial institution, as established in item 3 of Article 55 of the General Law of Banks and the regulations that regulate the matter on concentration limits. h. Branch of a foreign bank: institution that does not possess independent legal personality from the parent institution of which it is an integral part and that operates in another country.
i. Superintendence: Superintendence of Banks and Other Financial Institutions.
j. Home supervisor: Supervisor of the jurisdiction of the legal domicile where the operations of the financial group are consolidated and whose responsibility is to supervise globally the operations and risks of the financial group.

k. Host supervisor: Supervisor that receives in its jurisdiction financial institutions related to others, whose headquarters is in a different legal domicile or jurisdiction.
l. Significant Linkages: According to what is defined in Article 55, item 2 of the General Law of Banks and the corresponding norms issued by the Board of Directors.
m. Capital instruments: Refers to common or ordinary shares, preferred shares, other titles of participation in the capital of the issuing entity, and subordinated debt instruments.

Art. 2. Object.- This norm has as its object to establish the requirements to be met for the formation of a financial group; the provisions that allow identifying them; the legal, administrative or corporate structure of these; the establishment and obligations of the responsible coordinator of the financial group; the minimum requirements, restrictions and responsibilities that controlling companies and other members of the group must meet and comply with; aspects regarding consolidated supervision and the consolidation of financial statements; compliance with solvency requirements by the financial group; the management of risks faced by the members of the group; as well as the functions and responsibilities of collaborators in the consolidated supervision of financial groups, among others.

Art. 3. Scope.- The provisions of this norm are mandatory for all those institutions that, according to the terms of this norm and the provisions of the General Law of Banks, are part of a financial group.

Compliance with this norm does not exempt the institutions that are part of the financial group from complying with special laws and prudential norms applicable to them.

CHAPTER II
EXISTENCE OF FINANCIAL GROUP

Art. 4. Determination of the financial group.- According to the definition established in Article 135 of the General Law of Banks, Financial Group is the grouping of two or more legal entities that carry out financial nature activities, of which one of them must be a bank or non-bank financial institution that captures public deposits, among which there is common control by ownership relationships, administration, use of corporate image or frequent assumption of shared risks, or without these relationships existing, they decide the effective control by common agreement.

For the purposes of determining the existence of a financial group, there is common control by:

a. Ownership:

When one or more legal entities are subsidiaries of another(s).
When one or more institutions are branch(es) of foreign financial institutions.
When any of the cases described in letters a, b, c and d of item 2, of Article 55, of the General Law of Banks occurs.

b. Administration or assumption of risks:

Between legal entities that have directors, managers or principal officials or executives in common.
When from the official documentation of a legal entity it can be affirmed that it acts as a division or department of another legal entity.
Between legal entities that have common shareholders or partners who have the possibility to designate, veto or remove at least one member of the board of directors or equivalent body of said persons.

c. Use of corporate image:

When two or more legal entities act jointly before the public.
When two or more legal entities use equal (or similar) names or logos that identify them before the public as members of the same financial group.

The institution that finds itself in one or several of the situations indicated above must inform the Superintendent, and must comply with the provisions of the General Law of Banks and with the information requirements, organization and other aspects established in this norm.

Art. 5. Presumption of existence of financial groups.- As established in Article 138 of the General Law of Banks, the Superintendent may presume the existence of a financial group when between financial institutions there occur, among other similar, the following situations:

a. Existence of direct commercial dependence difficult to substitute in the short term. b. When the resources for the development of the activities of an institution come directly or indirectly from another legal entity.
c. The carrying out of business in the same premises.
d. When a legal entity is the final recipient of financing granted to another legal entity. e. When the same guarantee backs obligations of two or more legal entities or there is assignment of guarantees between them. f. The granting of credits for significant amounts in relation to the equity of the borrower or without adequate guarantees. g. The offering of services under the same corporate image. h. The possibility of exercising veto rights over business.
i. The frequent assumption of shared risks.
j. The existence of common policies or similar management or coordination bodies. k. Volume, periodicity or other conditions of operations between institutions.
l. Other situations that by their nature allow presuming the existence of a financial group.

When the Superintendent presumes the existence of a financial group, it will issue a resolution on the matter. The institutions included in the aforementioned resolution will have a period of thirty days counted from the respective communication to prove the contrary. In case they do not dispel what is expressed in the resolution, the institutions included in this must present the information required in Article 7 of this norm and comply with what is established in it.

Art. 6. De facto financial groups.- As established in Article 139 of the General Law of Banks, financial institutions that act as a financial group without regularizing, will be considered as a de facto financial group, being subject to the provisions established in this norm and in the General Law of Banks.

CHAPTER III
INFORMATION TO BE PROVIDED IN THE ORGANIZATION OF FINANCIAL GROUPS

Art. 7. Information that must be presented.- Any financial institution that, according to the terms of the General Law of Banks and this norm, is part of a financial group, must present to the Superintendent, through the Responsible Coordinator referred to in Chapter VI of this norm, the following information:

a. Complete curriculum vitae of the members of the board of directors of the responsible coordinator and of the other members of the financial group, including the controlling company and other members located abroad supervised by the host supervisor of the country where they are located; according to Annex 1, which becomes part of this norm. b. Notarized reasoned declaration of the name or trade name of the member entities of the financial group and the types of relationships existing between them; according to Annex 2, which becomes part of this norm.
c. List with full names, identity card number, passport (for foreigners) and percentage of participation of natural persons and their related parties, ultimate owners, who jointly have a participation equal to or greater than 5% of the shares in a succession of shareholder legal entities of the member institutions of the group, including the controlling company. In order to determine if the final natural persons indicated here are 5% shareholders of the capital of any member of the financial group, the calculation methodology established in the “Norm on Updating Information of Shareholders of Financial Institutions” must be followed.

Likewise, an organizational chart of the shareholding structure and 5% shareholders must be presented, in which it is reflected whether this percentage of participation is individual or together with their related parties, indicating the full names of the natural or legal persons contained in this scheme.

The Superintendent is empowered to request the information it considers necessary from the natural persons who, according to the aforementioned calculation methodology, are 5% shareholders, such as: curricula, identification, income and expenditure patrimonial statements, identification data, etc.

Likewise, the Superintendent is empowered to request the information it considers necessary about the legal entities in which the 5% natural person shareholders participate, such as members of boards of directors, activity to which they are dedicated, constitution and registration data, financial statements, among others.

d. Notarized reasoned copy of the instrument that justifies the legal representation of the controlling company of the members of the financial group. e. Notarized reasoned copy of the partnership agreement, bylaws and their reforms, registered in the competent registry of the controlling company of the members of the group. f. Full names of the internal auditors and the external audit firm of the controlling company and of the members of the financial group. g. For branches or subsidiaries constituted abroad controlled by institutions located in the country, a certificate issued by the supervisory body of their legal domicile must be presented, in which it states compliance with the aspects indicated in Article 14 of this norm.

The information required by this article must be updated whenever there are changes.

Those interested in constituting and operating financial institutions in the country, in addition to presenting the information required by the corresponding legal and regulatory provisions, when they are part of a financial group, must present the information required in this article and also comply with what is indicated in this norm.

The Superintendent may exempt the shareholder, the financial group, or one of the institutions of the same, from one or several of the aforementioned requirements, when any of the following situations occur:

When the partner(s) legal person(s) is a public law institution with capacity for such effect.
When the partner(s) legal person(s) are bilateral or multilateral organizations recognized internationally as such or organizations and/or non-profit foundations dedicated internationally to development.
When the partner(s) legal person(s) are institutions with first-rank international rating performed by an internationally recognized risk rating agency.
When the partner(s) legal person(s) quote their shares on a stock exchange or regulated market.

All information required here must be supported by the interested party, to the satisfaction of the Superintendent.

Likewise, the Superintendent may authorize exceptions to the presentation of some or all of the aforementioned information requirements, when this, having been required by other prudential norms, is found updated in the files of this Superintendence.

Art. 8. Obligation of regularization.- Both the institutions that notify the Superintendent according to the terms of the previous article, and the institutions included in the declaration of existence referred to in Article 5, must adapt their structures in such a way that they comply with the provisions of this norm within the period determined by the Superintendent, which will start counting from the day they are notified of the complete receipt of the information referred to in the previous article, or they are notified of the resolution referred to in Article 5, as the case may be. To this end, they will present to the Superintendent, within the first ninety (90) days of the indicated period, a Regularization Plan, indicating the actions that will be taken and the calendar to comply with the requirements of this norm.

CHAPTER IV
ORGANIZATION OF FINANCIAL GROUPS

Art. 9. General aspects.- Financial groups must be organized under the control of a controlling company constituted in the country or abroad, in the latter case, being subject to consolidated supervision according to international parameters as established in Article 14 of this norm. The financial group must have a responsible coordinator in the country, which will have the functions indicated in Chapter VI of this norm.

Art. 10. Control.- The controlling company must control, directly or indirectly, more than fifty percent of the shares of the member institutions of the financial group.

When for any reason the controlling company loses control of a member company of the financial group, it must immediately notify the Superintendent and proceed to comply with what is indicated by Article 30 of this norm.

When the controlling company is the shareholding company, in no case can it carry out operations that are typical of the financial institutions that are part of the group.

Art. 11. Other manifestations of control.- Without prejudice to what is established in the preceding article, the Superintendent may also authorize that the controlling company exercises effective control of another institution through a formal agreement between them, without the controlling company holding a percentage greater than fifty percent in the capital of the other legal entity, provided that the interested parties demonstrate beforehand to the aforementioned official compliance with all the following conditions:

a. A project of the agreement to be signed between the controlling company and the corresponding financial institution is presented, where it is evidenced that the first possesses the majority of votes in the general meetings of shareholders, participates in the administration, as well as in the approval and implementation of the policies that will govern this relationship and the formal commitment to comply with the provisions of the General Law of Banks and this norm. b. Consolidated financial information is generated, in which the member institutions and each of the intra-group operations are identified and the individual capital of its members and consolidated capital of the financial group can be measured.
c. Such information is presented, within the deadlines and forms established in this norm.

If the institution is located outside the country, compliance with what is indicated in Article 14 of this norm must additionally be met.

Art. 12. Requirement to constitute a shareholding company in the country.- For the purposes of what is indicated in the final part of the second paragraph of Article 135 of the General Law of Banks, the Superintendent may require the constitution in Nicaragua of a shareholding company for the institutions of the group established in the country, in the following cases:

a. When the controlling company located abroad shows reluctance to provide, through the responsible coordinator, the information that is required by the Superintendence. b. When any of the requirements indicated in Article 14 is not met.
c. Other circumstances that hinder or obstruct the effective consolidated supervision of the local group.

Notwithstanding what is indicated in the first paragraph of this article, the Superintendent may accept, when any of the cases indicated in the preceding letters occur, that a shareholding company constituted abroad is the one that controls and consolidates the local group, provided that it is domiciled and subject to the current legal provisions in Nicaragua.

Art. 13. Encumbrance of shares.- Investments in capital instruments made by the controlling company must remain free of any encumbrance, except in cases expressly authorized by the Superintendent.

CHAPTER V
MEMBERS OF THE FINANCIAL GROUP ABROAD

Art. 14. Supervision according to international parameters.- The acceptance of the country in which member institutions of the group, including the controlling company, can be constituted or located, as well as the countries in which national institutions can invest in capital instruments of foreign financial institutions, will be subject, among other things, to the following conditions:

a. The country must have a prudential regulation regime that incorporates into its regulation the following aspects:

Provisions for the granting of licenses that allow determining the integrity of both shareholders and the administration of the institution.
Provisions that allow determining the degree of compliance with minimum international standards for the effective supervision of financial groups, namely:
i. All international financial groups must be supervised by a home supervisor, who develops consolidated and cross-border supervision of the entire group in accordance with international best practices.

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ii. The establishment and operation of a cross-border establishment must have the prior consent of both the host supervisor and the home supervisor.
iii. Supervisory authorities, both home and host, must have the authority to gather information on the cross-border establishments of banks or financial groups of which they are the supervisory authority.
3. Minimum individual and consolidated capital adequacy ratios or other solvency requirements, depending on the type of financial industry that constitutes the financial group.
4. Limits on the concentration of risks of investments, credit, and other risky assets, based on individual clients and economic groups, as well as limits on exposures with related parties.
5. Regulations for the establishment of minimum estimates on provisions for investments, credits, and other assets.
6. Regulations on corporate governance, with reference to the risk management and internal control scheme.
b. The country must have a prudential supervision regime that, to the satisfaction of the Superintendent and in accordance with international parameters, precisely incorporates the following aspects:

Monitoring mechanisms that allow for the regular determination of the adequate compliance by entities with the minimum prudential provisions indicated in the preceding letter a.
In-situ inspections with broad scope on the risk aspects of the entity that may affect its stability, solvency, and strength.
Sanctioning regime on risky behaviors that threaten the stability, solvency, and strength of the institution.
Schemes for the proper management of situations of financial instability and intervention of institutions.
c. The country must have laws, regulations, or other provisions oriented towards preventing money laundering from illicit activities and the financing of terrorism.
d. The competent authority of the country must have the authority to establish formal arrangements with the Superintendencia, allowing for coordination in supervision matters and information exchange between supervisors.

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The responsible coordinator must present the documentation and information that corroborates the requirements established in the preceding letters.
When any of the previously accepted jurisdictions loses that status for not complying with the above, the Superintendent may take preventive and corrective measures that, in accordance with the law, are deemed necessary, for the protection and stability of the institutions at the national level of the group, including, among these, the closure or transfer of the institution to another jurisdiction.

CHAPTER VI
RESPONSIBLE COORDINATOR
Art. 15. Responsible coordinator of the financial group.- Every financial group domiciled in the country must have a responsible coordinator whose general functions are, without prejudice to the specific functions indicated in Article 17 of this regulation, to serve as a link between the Superintendencia and other institutions of the group, both national and foreign, and to coordinate the policies of said group at the national level. Art. 16. Institution that will be the responsible coordinator.- When the controlling company is located in the country, the role of responsible coordinator will correspond to it. When the controlling company is located outside the country, the responsible coordinator of the group will be the institution located in the country, in cases where there is only one institution. However, when the group has more than one member in the national territory, the role will correspond to the institution that has the largest amount of assets. Art. 17. Powers and responsibilities.- Without prejudice to what is indicated by Article 15 of this regulation, the responsible coordinator of a financial group will have the following powers and responsibilities:
a. Gather and provide the information that the Superintendent requires for consolidated supervision purposes, from both national institutions and those located abroad.

b. When applicable, consolidate, combine, or apply the required reporting system, in the consolidated and/or combined financial statements of the financial group, in accordance with what is stated in this regulation and the particular nature resolutions issued by the Superintendent.
c. Send to the Superintendent the financial information and other reports of the members of the financial group, prepared in accordance with what is provided in this regulation.

13 d. Receive from the Superintendencia a copy of the final report on inspections carried out/informed to the members of the financial group, containing the indications and recommendations that said body deems necessary, in order to follow up on the measures indicated therein; the resolutions imposing sanctions on the members of the group at the national level and any other communication that is relevant for the fulfillment of its functions as responsible coordinator of the financial group. e. Communicate immediately to the Superintendent about any relevant fact that is within its knowledge related to the entities that make up the financial group, both local and foreign, regarding the non-compliance with the provisions established in the laws and regulations applicable to them. f. Implement mechanisms for the identification and administration of risks, ensuring that the members of the group adapt their organization and function manuals, risk control policies and procedures, and internal norms of a similar nature. g. Verify the fulfillment of the required capital of the financial group. h. Follow up on the reports issued by internal auditors, external auditors, and the resolutions or reports of the Superintendencia or another corresponding Supervisory Body, informing the Superintendencia of their total compliance.
i. Verify that the information provided to the Superintendencia is timely, truthful, reliable, and reflects the real financial situation of the institutions that make up the financial group, both national and foreign.
j. Ensure that the member institutions of the financial group comply, at all times, with the provisions of the laws and prudential regulations applicable to each member of the group. Art. 18. Sanctions.- Without prejudice to what is established in Article 163 of the General Banking Law, when the controlling company is located abroad, the non-compliance with the obligations corresponding to the responsible coordinator will be sanctioned in accordance with the provisions of Article 168 of the General Banking Law, in accordance with what is established in the regulation on the matter.

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CHAPTER VII
CONSOLIDATED CAPITAL AND OTHER PROVISIONS
Art. 19. Calculation of the Excess (or Deficit) of Consolidated Capital of the financial group.- Each financial group must have consolidated capital destined to cover all the risks faced in the operations and activities carried out by its members. Said consolidated capital, at all times, must be equal to or greater than the sum of the solvency requirements demanded by the corresponding regulations for each member of the financial group. Understand by solvency requirement, the minimum capital required to cover all the risks faced by each member institution of the group. The calculation of consolidated capital must be carried out in accordance with Annex 3 and its instruction, which becomes an integral part of this regulation, and observing the concepts related to Risk-Weighted Assets, Capital Calculation Base, and Minimum Required Capital contained in the methodology described in the Prudential Regulation on Capital Adequacy in force, or the equivalent methodology established in the regulations issued by other supervisory bodies. In the case of group member institutions supervised by the Superintendencia that do not have a solvency requirement, the greater of applying what is established in the Prudential Regulation on Capital Adequacy, or the sum of the minimum share capital and the legal reserve of said member will be taken as such. When it comes to shareholding companies, only what is established in the aforementioned Prudential Regulation on Capital Adequacy will apply to them. In the case of group member institutions supervised by another supervisory body, the solvency requirement established for these entities by said body will be taken as the requirement. If, as a consequence of what is expressed in the last paragraph of Article 14, a foreign financial institution belonging to the financial group were under a regulation that does not meet the conditions indicated in said article; in that case, and while its final destination is defined as indicated by this regulation, for the determination of the excess (or deficit) of capital of the financial group, what is established in the Capital Adequacy Regulation in force will be applied to said institution. The fulfillment of solvency at the consolidated level of the financial group does not exempt the members that make it up from the individual solvency compliance that corresponds to them. Art. 20. Cross-holding.- The cross-holding of capital instruments between institutions belonging to the financial group is prohibited, whether carried out directly or indirectly.

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It is prohibited for member institutions of the financial group to guarantee in any way for third parties, or the controlling company itself, to pay the subscription of capital in other member companies. Art. 21. Assumption of obligations with group members and third parties.- When the controlling company is the shareholding company, the obligations it assumes must adjust to the following:
a. Operations with third parties:
It may only incur subordinated debt and obligations convertible into capital with third parties outside the group with the purpose of dedicating the obtained resources to the development of its corporate object. The aforementioned obligations must not exceed, at any time, the limits established in the General Banking Law. Likewise, it may enter into those contracts that are necessary for the development of its administrative operations. b. Operations with group members:
It may maintain credit linkages with companies that are part of the financial group only in the form of subordinated debt and obligations convertible into capital issued by them. The subordinated debt that is not mandatorily convertible into capital obtained by the shareholding company may only be invested in the institutions belonging to the financial group in the same manner in which it was obtained: as subordinated debt. Art. 22. Single Chart of Accounts.- For the recording of its operations, the shareholding company must adopt, insofar as applicable to it, the Single Chart of Accounts for Banking and Financial Institutions, approved by the Board of Directors of the Superintendencia. Art. 23. Subject to prudential regulations.- Without prejudice to the legal and regulatory provisions applicable to the member institutions of a financial group, when the controlling company is the shareholding company, it will be subject, insofar as applicable to it, to the prudential regulations issued by the Board of Directors for banks and financial institutions. Art. 24. Privileges of the members of the financial group.- Only institutions that are part of a Financial Group may carry out the activities indicated in Article 145 of the General Banking Law.

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CHAPTER VIII
PREVENTIVE MEASURES, ACTIONS FOR EQUITY DEFICIENCIES Art. 25. Preventive measures.- Without prejudice to the suspension or termination of privileges and pecuniary sanctions that correspond, in accordance with what is established in Article 155 of the General Banking Law, the Superintendent may establish, insofar as applicable, to the entities located in the country, the provisions contemplated in Article 88 of said Law, when the following circumstances or relevant facts occur, among others:
a. When the legal and administrative structure of a financial group does not allow or hinders the consolidated supervision of its members. b. When it is presumed that, together or individually, related parties to a financial institution control, directly or indirectly, another financial institution, national or foreign, and it was not informed as a member company or as a related party to the financial group, both at the national and foreign level.
c. When in the country of origin or in the country where the main activities of a financial group are developed, it is not under supervision according to international parameters, as established in Article 14 of this regulation.

d. When one of the shareholders with a participation equal to or greater than 5% in the capital of a member of the financial group, director(s), supervisor(s), manager(s), auditor(s), attorney-in-fact(s), or official(s) of the entities that make up the financial group do not meet the solvency, integrity, and competence requirements appropriate to the position they hold, or when any of them do not provide, within the stipulated time, the information requested in this regulation. e. When there is a refusal, by its directors, managers, or officials, to send information to this Superintendencia regarding the operations and businesses of the entities that make up the financial group. f. When the responsible coordinator does not comply or complies poorly with its obligations. g. Any other situation, in the judgment of the Superintendent, by reasoned resolution, that is an impediment to carrying out the consolidated supervision of the financial group. Art. 26. Equity deficiencies.- Based on what is established in Articles 143, 144, and 154 of the General Banking Law, the controlling company will be obligated to subscribe and pay promptly the proportional part that corresponds to it in the capital increases of the member institutions of the group domiciled in the country, which are required by the Superintendent to regularize the equity situation of these, in cases where third parties have not subscribed and paid said increase. For such purposes, the Superintendent will urge the relevant party to call an extraordinary shareholders' meeting within the time limit it determines. Otherwise, the Superintendent will make the call. In the same way and with the object of safeguarding the stability of the financial group established in the country, the Superintendent may demand that the controlling company proceed to alienate its shareholding participation in those member institutions of the group that present administrative deficiencies, financial problems, solvency issues, or risks of any kind that may endanger the stability of the group.
CHAPTER IX
COLLABORATORS AND PERIODIC INFORMATION
Art. 27. Collaborators in consolidated supervision.- The following are collaborators of consolidated supervision:
a. Internal Audit:
The internal audit unit of the controlling company must incorporate in its Annual Work Plan, the evaluation of accounting practices, important transactions between its members, the correct consolidation and/or combination of financial statements, the compliance with the provisions established in the regulations on Internal Control and Audit and on Prevention of Money Laundering and other Assets issued by the Board of Directors, the compliance with this regulation, and the evaluation of the internal audit units belonging to each of the companies of the financial group. b. External Audit:
External audit firms must contemplate in the audited financial statements the evaluation of the procedures and the reasonableness of the consolidated and/or combined financial statements of the accounting practices, the compliance with the required capital of the group, the mechanisms for identification and administration of risks of the financial group, the evaluation of the internal audit unit of the controlling company, the compliance with the other provisions established in the Regulation on External Audit issued by the Board of Directors, and what is required in this Regulation.

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Art. 28. Information for consolidated supervision.- In addition to the powers and responsibilities established in the General Banking Law and in this regulation, the responsible coordinator must prepare and send to the Superintendent the following information:
a. Monthly:
Calculation of the Excess (or Deficit) of Consolidated Capital of the Financial Group, according to Annex 3. b. Quarterly:
List of the members of the board of directors and alternates of the controlling company supervised by another supervisory body, according to Annex 4, annex that becomes an integral part of this regulation. Shareholding status of the shareholders of the controlling company supervised by another supervisory body, according to Annex 5, annex that becomes an integral part of this regulation. Consolidated and/or combined financial statements, based on the accounting standards issued by the Board of Directors, applying the procedures and formats contained in Annex 6, which becomes part of this regulation.
c. Annually:
Report of external auditors on the consolidated and/or combined financial statements, based on the accounting standards issued by the Board of Directors and applying the procedures and formats contained in Annex 6, which becomes an integral part of this regulation. Any other information that, in the judgment of the Superintendent, is necessary for the consolidated supervision of financial groups. The information indicated in this article must be sent to the Superintendent by physical and electronic means as requested by it. Art. 29. Submission of information.- The information referred to in the previous article must be presented within the following deadlines:
a. The monthly information, as well as the quarterly information, which has a cutoff date of March 31, June 30, September 30, and December 31, will be presented no later than thirty days after the cutoff date.

19 b. The submission of the audited annual information will be carried out in accordance with what is established in the Regulation on External Audit issued by the Board of Directors.
c. All documents, as well as tables or details of information requested in this regulation, must contain the full name and signature of the official designated by resolution of the Board of Directors of the Responsible Coordinator.
CHAPTER X
AUTHORIZATION OF EXCLUSION AND FINAL PROVISIONS Art. 30. Authorization of exclusion from the financial group. In accordance with what is established in Article 141 of the General Banking Law, the separation of a company from the financial group must be authorized by the Superintendent. For these purposes, a formal petition must be made. This request must be accompanied by a plan that includes the deadlines and measures that the institution will follow to permanently end the relationships indicated in Article 4 of this regulation and with all and each of the activities indicated in numerals 1, 3, and 4 of Article 145 of the LGB, and ensure that the operations indicated in numeral 2 of the same article, if any, comply with all and each of the provisions of the "Regulation on the Contracting of Service Providers for the Execution of Operations or Services on Behalf of Financial Institutions" and other legal and regulatory provisions regarding related parties, in such a way that it is reliably demonstrated that the institution in particular is no longer part of the financial group. The aforementioned plan, once presented, will be reviewed, and if it is found that it does not meet the pursued objective, it will be returned to the interested party to make the pertinent modifications. While the plan indicated in the previous paragraph is not presented and its compliance is not demonstrated, the interested party must comply with the information requirements required by this regulation in the aspects that correspond to it as a member of the group to which it belongs. Art. 31. Administrative, financial, solvency deficiencies, and other risks.- For the purposes of applying the provisions contained in the second paragraph of Article 26 of this regulation, the Superintendent will determine that a national institution presents any of the deficiencies indicated in said article when, as a result of the implementation of the uniform evaluation system applicable to the type of institution evaluated, it has obtained in the last 12 months a global rating that reflects a combination of weaknesses ranging from moderately important to unsatisfactory, consequently offering little resistance to the set of adverse business situations and that could deteriorate easily if not

20 achieve implementation of actions to correct areas with weaknesses. For this reason, these institutions are a concern for the supervisory entity, requiring more intense supervision than normal to address the deficiencies. With respect to group institutions located abroad, the decision on the applicable evaluation system to determine that it presents administrative deficiencies will be taken jointly by the Superintendent with the respective foreign supervisory bodies. Art. 32. Authorization for investments.- In accordance with the provisions of articles 136 and 142 of the General Banking Law, member institutions of a financial group must request prior authorization from the Superintendent to constitute or acquire a financial institution, both locally and abroad. To this effect, interested parties must present the information contained in Annex 1 of the current Regulation on Deposit and Investment Limits. For the case indicated by article 136 of the General Banking Law, the information required by article 14 of this regulation must also be presented. Art. 33. Changes in shareholding of a member institution of the financial group.- Changes in shareholdings of members of a financial group shall be governed by the provisions of the General Banking Law and the relevant regulations. Art. 34. Legalization of documents from abroad and their language.- Any information and/or documentation required by this regulation that is in a language other than Spanish must be presented with its corresponding translation, which must comply with the stipulations in national laws on the matter or with the laws of the country where the translation is performed. Documents from abroad required from natural or legal persons in this regulation must meet the requirements established by the relevant laws to have legal effect in the country. Art. 35. Modification of annexes.- The Superintendent may modify the information requested in the annexes of this regulation as the application of this regulation requires. Art. 36. Transitional.- For the case of combined and/or consolidated financial statements required in 2008, comparability with the consolidated and/or combined financial statements of 2007 will not be mandatory; rather, from 2009 onwards, comparison with the previous year's financial statements will be mandatory.

21
Art. 37.- Repeal.- The Regulation on Consolidated Supervision of Financial Groups, Resolution No. CD-SIBOIF-316-1-SEP23-2004, dated September 3, 2004, CD-SIBOIF-335-1-ENE19-2005 dated January 19, 2005, and CD-SIBOIF-374-1-SEP2-2005 dated September 2, 2005, are repealed. Art. 38. Effectiveness.- This Regulation shall enter into effect upon its publication in La Gaceta, Official Gazette.

ANNEX 1
BOARD OF DIRECTORS MEMBERS
INSTITUTION:
_________________________________________________________________ GENERAL DATA Full Name:
______________________________________________________ Nationality:
______________________________________________________ Profession or occupation:
______________________________________________________ Place and date of birth:
______________________________________________________ Identity Card Number:
______________________________________________________ Residence Card (in the case of foreign residents in the country) __________________________________________________ Passport Number (in the case of non-resident foreigners) __________________________________________________ RUC No. (or its equivalent, as applicable):

22
Position to be held in the Institution:
______________________________________________________ Passport No. if foreign:
______________________________________________________ Immigration status:
______________________________________________________ Do you have authorization to work in the country? (only for foreign shareholders holding administrative or director positions) YES ( ) NO ( ) Authorization Number:
_______________________________________________ Date of Authorization:
_______________________________________________ Validity of Authorization:
_______________________________________________ KNOWLEDGE AND EXPERIENCE Knowledge and experience in banking, stock market, financial activities and financial risk management:
Entity Position Period from ... to
Main
Functions

Positions held or currently held in other entities:

Entity Position Period from ... to
Main
Functions

Studies and training completed:
Establishment
Title or course name
Period from ... to Observations

OTHER INFORMATION
Have you been declared bankrupt or insolvent? YES ( ) NO ( ) If affirmative, indicate the reasons and state if you have been rehabilitated:
___________________________________________________________________ ___________________________________________________________________ ______________________________________________ Have you ever been subject to judicial proceedings? YES ( ) NO ( ) If affirmative, indicate:
Reason Type of process Date Final
Result

Have you been administratively sanctioned or judicially prosecuted for money laundering or other assets? YES ( ) NO ( ) If affirmative, indicate the sanction or process.
Are you a partner/member of any entity? YES ( ) NO ( ) If affirmative, provide the following information:

24
Name of the
Entity Country
RUC No. or equivalent
% participation Amount in
C$

7
I declare that the data above are true, subjecting myself to the sanctions determined by law for any inaccuracies.
Place and date: ___________________________________ f) Name: SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS
Annex 2
DECLARATION ON LIST OF MEMBER COMPANIES OF THE FINANCIAL GROUP I am aware that providing the Superintendency of Banks and Other Financial Institutions, knowingly or through negligence, any false or deceptive information in response to requests made within the powers granted by Law to the Superintendent, is punishable by Law. I state that the information I provide below regarding the member companies of the Financial Group _, is complete and true, and that there are no other relevant facts for the consideration of the exact composition of the financial group to which I belong, that must be brought to the knowledge of the Superintendent. I commit to immediately inform the Superintendent about any relevant changes to such consideration that may arise after the current declaration, as well as to update it annually, no later than December 31, while I belong to the financial group. To: A. LIST OF MEMBER COMPANIES OF THE FINANCIAL GROUP:
Names of Country Name of Supervisory
Institutions Residence Body that supervises

B. SIGNIFICANT LINKAGES BETWEEN GROUP MEMBERS:
a) Shareholding structure of the financial group:
Names of Names of Percentage of
Institutions Shareholders participation
Controlling Co. X 51%
Acc. Y 49%
Bank Controlling 51%
Acc. Z 49% b) Board of Directors members in the Financial Group:
Names of Name of Position in the
Institutions Director Board of Directors

c) Detail any other type of significant linkage that exists between members of the group financial.
Name: _____________________________ Position: _______________________ Signature: _______________________________ Date: _______________________ INSTRUCTIVE FOR ANNEX 3 This instructive aims to indicate the steps to follow to fill out the "Annex 3" titled "Calculation of the Surplus (or Deficit) of Consolidated Capital of the Financial Group". This annex must be complemented with the information required in annexes 2 and 3 of the current Capital Adequacy Prudential Regulation. General Instructions:

For the purpose of determining the Surplus (or Deficit) of Consolidated Capital of the
Financial Group, individual financial statements of each member of the group will be used.
For the purpose of filling out annex 3, proceed as follows, as applicable:
a) For banks and financial companies supervised by the Superintendence, fill out this annex according to the instructive established below.

b) For non-bank financial institutions supervised by the Superintendence that do not have solvency requirements, fill out this annex according to the instructive established below; otherwise, they must proceed to determine such requirement according to the relevant regulations, presenting the results obtained, where applicable, in the respective lines of this annex. c) For group member institutions supervised by another supervisory body that have solvency requirements, they must proceed to

26 determine such requirement according to the regulations issued by said bodies, presenting the results obtained, where applicable, in the respective lines of this annex. Otherwise, they must fill out the
annex 3 according to the instructive established below.
ANNEX 3, filling out the format for Calculation of the Surplus (or Deficit) of Consolidated Capital of the Financial Group
Date:
The date will be entered in the following order: day, month, and year. Example, replace the word Date: with January 31, 200X.
I. Total Risk-Weighted Assets:
As observed in the annex, it corresponds to the sum of Risk-Weighted Credit Assets plus Notional Amount of Assets for Exchange Risk; minus: Pending Adjustments to be Made and Investments in Capital Instruments. A. Risk-Weighted Credit Assets:
Enter the weighted balance of each asset item, according to the result obtained in
annex 2: "form for the Calculation of Asset Weighting" of the current Capital Adequacy Prudential Regulation.
B. Notional Assets for Exchange Risk:
Enter for each member of the Group, the result corresponding to them according to the last column of annex 3: "Notional Amount of Assets for Exchange Risk of the current Capital Adequacy Prudential Regulation".
C. Less: Pending Adjustments to be Made:
Corresponds to the total pending adjustments to be made determined as follows, according to the current Capital Adequacy Prudential Regulation.
D. Less: Investments in Capital Instruments:
Refers to the value of investments in capital instruments issued by other institutions, and determined according to the current Capital Adequacy Prudential Regulation.
II. Solvency Requirement, the Greater of: A or B
In this line, include the greater of the following concepts:
A. Minimum Required Capital: Include the minimum solvency requirement required by the respective regulation, whether established by the Superintendence or by another supervisory body.

B. Minimum Share Capital + Legal Reserve: Include the minimum share capital and mandatory legal reserve established by the respective regulation, for the case of members that do not have a solvency requirement.
III. Consolidated Capital of the Financial Group:
Corresponds to what is required in the Regulation on Capital Calculation Base, or the equivalent methodology established in regulations issued by another supervisory body.
A. Primary Capital:

Refers to: 1. Paid-in Capital, 2. Donated Capital, 3. Share Issuance Premiums,
4. Contributions for Capital Increase, 5. Adjustments for Minority Interest in Other
Companies, 6. Legal Reserve, 7. Accumulated Results of Previous Years and 8 Results of the Period, according to the current Prudential Regulation on Capital Adequacy.
B. Secondary Capital:
As observed in the annex, it corresponds to: 1. Non-Capitalizable Donations, 2.
Adjustments for Asset Revaluation, 3. Other Equity Reserves, 4. Accumulated Results of Previous Years, 5. Results of the Period, 6. Cumulative Preferred Shares or Other Hybrid Instr., 7. Subordinated Bonds and Redeemable Preferred Shares and 8. General Provisions, following what is established by the current Prudential Regulation on Capital Adequacy.
C. Less: Excess (Secondary Capital - Primary Capital)
The above must follow what is established by the current Prudential Regulation on Capital Adequacy.
D. Less: Pending Adjustments to be Made:
Corresponds to the sum of: pending provisions for Credit Portfolio, interest to be cleaned up, provisions for assets adjudicated and cleaning up of various accounts.
E. Less: Investments in Capital Instruments:

Refers to the value of investments in capital instruments issued by other institutions, and determined according to the current Capital Adequacy Prudential Regulation.
IV. SURPLUS (OR DEFICIT) OF CAPITAL OF EACH MEMBER (III-II):
Corresponds to the result of subtracting the Solvency Requirement, the Greater of: A or B (row II), from the Capital Calculation Base (row III).

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V. SURPLUS (OR DEFICIT) OF CONSOLIDATED CAPITAL OF THE FINANCIAL GROUP:
As observed in the format, the capital surplus of each member, obtained in the previous row, is multiplied by the percentage of shareholding that the Controlling Company holds in each of its members.

For the case of those companies that form a financial group due to common control by ownership relationships lower than 51% of capital, administration, use of corporate image or frequent assumption of shared risks, or even without these relationships, they decide effective control by mutual agreement; the controlling company must define the percentage of effective control it possesses (directly, indirectly or through other manifestations) in said company, and this percentage will be multiplied with the capital surplus resulting from said company. For the above, the controlling company must observe the following:

In no case, the percentage to be applied can be less than 51%.
In the case where a group member individually presents a negative capital result (deficit), the percentage to be multiplied to this deficit will be 100% and the result of this operation will be transferred to line V, titled "Surplus (or Deficit) of Consolidated Capital of the Financial Group".
The Surplus (or Deficit) of Capital of the controlling company of the financial group must be multiplied by 100% and the Result placed in line V.- "Surplus (or Deficit) of Consolidated Capital of the Financial Group".

SUPERINTENDENCY OF BANKS AND OTHER
FINANCIAL INSTITUTIONS
Annex 4
LIST OF BOARD OF DIRECTORS MEMBERS OF THE
COMPANY __________________
DATE:________________
I. Proprietary Members Positions
II. Substitute Members

29
Period of the Board of Directors: from___________to _____________ ___________________________ ________________ GENERAL MANAGER SECRETARY BOARD OF DIRECTORS SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS
Annex 5
SHAREHOLDING PARTICIPATION STATEMENT
OF THE COMPANY_____________________
CUT-OFF DATE:__________________
Subscribed Capital ____________
Paid Capital _____________
Value of each share ________
SHARES CAPITAL DATE
NAME OF SHARES CAPITAL PENDING PENDING
SHAREHOLDERS SUBSCRIBED SUBSCRIBED PAID PAYMENT OF PAYMENT SUBSCRIPTION Common Shares:
Preferred Shares:

GENERAL MANAGER SECRETARY
BOARD OF DIRECTORS

30
SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS
ANNEX 6
This annex is composed of the following annexes and instructives:
Annex 6 – 1 General Procedures for Consolidation and/or Combination of Financial
Statements
Annex 6 – 2 Consolidated and/or Combined Balance Sheet
Annex 6 – 3 Consolidated and/or Combined Statement of Results
Annex 6 – 4 Consolidated and/or Combined Statement of Changes in Equity
Annex 6 – 5 Consolidated and/or Combined Statement of Cash Flows
Annex 6 – 6 Consolidation and/or Combination Working Sheet.
Annex 6 – 6 – 1 Elimination Adjustment Entries for Consolidation and/or
Combination.
Annex 6 – 6 – 2 Detail of balances and transactions with related parties
Annex 6 – 7 Model of Notes to Consolidated and/or Combined Financial Statements
SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS
ANNEX 6 - 1
GENERAL PROCEDURES FOR CONSOLIDATION AND/OR COMBINATION OF FINANCIAL STATEMENTS The procedures necessary to carry out the consolidation and/or combination of the financial statements of a controlling company with its subsidiaries are as follows:
A. Consolidation and/or combination procedures:
a) Obtain the individual financial statements of the controlling company and its subsidiaries as of the established cut-off date. When dealing with consolidated and/or combined audited financial statements, these must be prepared based on individual financial statements of the controlling company and its subsidiaries duly audited as of the cut-off date.

31 b) Quarterly, both the controlling company and its subsidiaries must identify balances and transactions with related parties and must perform a reconciliation between them, in order to adjust or correct any existing difference. Additionally, a detail must be attached that details said balances and transactions in a detailed manner, clearly revealing their nature, according to Annex 6 – 6 – 2 "Detail of balances and transactions with related parties". c) From the information obtained in the previous letter, balances and transactions between members of the financial group must be eliminated, incorporating into Annex 6 – 6 –1 "Elimination Adjustment Entries for Consolidation and/or Combination", the elimination adjustments made and revealing separately said adjustments made by each member of the group financial. In the case where the controlling company exercises effective control of another financial institution through a formal agreement between them or forms part of the financial group by resolution of the Superintendent, without the controlling company holding a percentage greater than fifty percent in the capital of the other legal entity; this financial institution will combine its financial statements with the rest of entities belonging to the financial group that consolidate, eliminating the balances and transactions corresponding between the combining entity and the other financial entities of the group that consolidate, including the controlling company. In the case where there are two or more entities that combine their financial statements with the entities that consolidate, first the balances and transactions between the entities that combine must be eliminated, and then the balances and transactions with the entities that consolidate must be eliminated according to the description in the previous paragraph. d) For the purposes of consolidation and/or combination of financial statements,
Annex 6 – 6 "Consolidation and/or Combination Working Sheet" must be used.
e) Detail in the "Consolidation and/or Combination Working Sheet" the financial statements of the subsidiaries, starting with the controlling company (See Annex 6 – 6); f) Verify horizontally and vertically the columns of the consolidation working sheet, to integrate line by line the financial statements of the controlling company with the consolidated ones, and eliminate the book value of the investment of the controlling company in them.

g) In the case where any of the subsidiaries prepare and present their financial statements with accounting policies different from those established by the Superintendence, necessary adjustments must be made, in order to apply the accounting policies established by the Superintendence. h) The book value of the controlling company's investment in each subsidiary and/or combining entity must be eliminated, considering the percentage of participation that it has in the equity of the subsidiary. i) Minority interests in consolidated equity and results must be identified and separated, to arrive at the equity and net profit corresponding to the owners of the controlling company. Such minority interests will be revealed in the group balance sheet as a separate item from the net equity of the owners of the controlling company. j) The provisions in the last two letters must be presented as separate and individual accounting entries by subsidiary in annex 6- 6-1 "Elimination Adjustment Entries for Consolidation and/or Combination". k) Prepare the consolidated financial statements, according to Annexes 6 – 2 "Consolidated and/or Combined Balance Sheet", 6 - 3 "Consolidated and/or Combined Statement of Results, 6 – 4" Consolidated and/or Combined Statement of Changes in Equity", 6 – 5 "Consolidated and/or Combined Statement of Cash Flows", including the notes to the financial statements specified in Annex 6-7 "Model of Notes to Consolidated and/or Combined Financial Statements". l) When there are controlling companies that are also subsidiaries, first the consolidation of subgroups must be carried out, and then the consolidation of the entire group of consolidable and/or combinable entities must be carried out. m) Individual and consolidated financial statements must be prepared and presented based on the accounting policies established by the Superintendence and in the legal currency of Nicaragua. Annexes 6 – 2 "Consolidated and/or Combined Balance Sheet", 6 – 3 "Consolidated and/or Combined Statement of Results", 6 – 4 "Consolidated and/or Combined Statement of Changes in Equity" and 6 – 5 "Consolidated and/or Combined Statement of Cash Flows", with their respective Notes Annex 6-7, Annex 6 – 6 "Consolidation Working Sheet", Annex 6 – 6- 1 "Elimination Adjustment Entries for Consolidation and/or Combination" Annex 6 – 6 – 2 "Detail of balances and transactions with related parties", must be sent printed and with magnetic backup to the Superintendent.

33
The printed financial statements and their annexes must be submitted duly signed by the competent authorities.
B. The Working Papers must contain as a minimum:
The holding company's administration must retain the working papers that support the consolidation and/or combination process of the financial statements, for a period of no less than two years following the date of consolidation. These working papers must contain as a minimum the following:
a) The detail of balances and transactions with related parties; b) The reconciliations of balances and transactions; c) The accounting adjustments derived from the adaptation of accounting policies, when applicable; d) The individual financial statements that were used in the consolidation process. e) Annexes 6 – 2, 6 – 3, 6 – 4, 6 – 5, 6 – 6, 6 – 6 - 1, and 6 – 6 – 2 of this Norma. f) The notes to the financial statements, Annex 6 – 7, of this Norma.

34
FINANCIAL GROUP________________ AND SUBSIDIARIES Annex 6-2 CONSOLIDATED AND/OR COMBINED BALANCE SHEET (Expressed in Cordobas.)
AS OF:_____________________________ 200X 200Y
Assets
Cash and cash equivalents note ( )
Investments in securities, net note ( )
Securities and derivatives operations note ( ) Loan portfolio, net note ( ) Accounts receivable, net note ( ) Assets received in recovery of credits, net note ( ) Permanent investments in companies, net note ( ) Fixed assets, net note ( ) Other assets note ( ) Total Assets Liabilities Obligations with the public note ( ) Securities and derivatives operations note ( ) Securities in circulation note ( ) Obligations with financial institutions and for other financing note ( ) Obligations with the Central Bank of Nicaragua note ( ) S Technical reserves note ( ) Contractual creditors note ( ) S Reinsurance and guarantee institutions note ( ) Other accounts payable note ( ) Other liabilities and provisions note ( ) Subordinated obligations and convertible to capital note ( ) Total Liabilities Equity Equity attributable to owners of the Holding company (parent) note ( ) Paid-in share capital note ( ) Donated capital note ( ) Non-capitalizable equity contributions note ( ) Obligations convertible to capital note ( ) Equity adjustments note ( ) Equity reserves note ( ) Accumulated results from previous periods note ( ) Results of the period note ( ) Minority Interest Total Equity Total Liabilities - Equity Contingent accounts note ( ) Off-balance sheet accounts note ( ) The attached notes from __ to __ are an integral part of the financial statements (see model of attached notes).

35
FINANCIAL GROUP________________ AND SUBSIDIARIES Annex 6-3 CONSOLIDATED AND/OR COMBINED INCOME STATEMENT (Expressed in Cordobas.)
From:To____ 200X 200Y Financial Income note ( ) note ( ) note ( ) note ( ) S note ( ) S note ( ) note ( ) Financial Expenses Financial expenses for obligations with the public note ( ) note ( ) Financial expenses for Securities in Circulation note ( ) Financial expenses for obligations with financial institutions and for other financing note ( ) Financial expenses for obligations with the BCN note ( ) note ( ) note ( ) note ( ) note ( ) Changes note ( ) note ( ) note ( ) note ( ) note ( ) Net Operating Result from Participation in Subsidiaries note ( ) Contributions by law note ( ) Income tax expense note ( ) Attributable to owners of the holding company note ( ) Minority Interest note ( ) The attached notes from __ to ___ are an integral part of the financial statements (see model of attached notes). Period Result Net Financial Margin Gross Operating Result Gross Financial Margin Result before income tax and contributions for special laws Administrative expenses Participation in results of subsidiaries and associates Net income (expenses) for preventive estimation for asset risks Other net operating income (expenses) Financial expenses for securities and derivatives operations Financial expenses for other accounts payable Financial expenses for subordinated obligations and obligations convertible to capital Financial margin before monetary position adjustments Other Financial Expenses Financial expenses with head office, branches and agencies Other financial income Financial income from cash and cash equivalents Financial income from investments in securities Financial income from loan portfolio Financial income from securities and derivatives operations Retained premiums Commissions for ceded reinsurance and guarantee (net) FINANCIAL GROUP________________ AND SUBSIDIARIES Annex 6-4 CONSOLIDATED AND/OR COMBINED STATEMENT OF CHANGES IN EQUITY (Expressed in Cordobas) Share capital Unsubscribed capital Subscribed capital Unpaid capital Donated capital Non-capitalizable Equity Contributions Obligations convertible to capital Equity Adjustments Equity Reserves Accumulated Results of Previous Periods Total Balance previously reported as of Dec 31, 20XX Movements inherent to shareholders' decisions Share capital Issuance of shares Period result Additional paid-in capital Transfer of accumulated results to legal reserve Unrealized gains on available-for-sale investments Surplus from Revaluation of Fixed Assets Payment of cash dividends Issuance of subordinated obligations with mandatory conversion Capitalization of accumulated profits Balance as of ____ of 20XX Movements inherent to shareholders' decisions Share capital Issuance of shares Period result Additional paid-in capital Transfer of accumulated results to legal reserve Unrealized gains on available-for-sale investments Surplus from Revaluation of Fixed Assets Payment of cash dividends Issuance of subordinated obligations with mandatory
conversion Capitalization of accumulated profits Balance as of ____ of 200X The attached notes from __ to __ are an integral part of the financial statements (See model of attached notes).

36
FINANCIAL GROUP________________ AND SUBSIDIARIES Annex 6-5 CONSOLIDATED AND/OR COMBINED CASH FLOW STATEMENT (Expressed in Cordobas.)
AS OF:_____________________________ 200X 200Y
Cash flow from operating activities:
Net results
Adjustments to reconcile the period result with cash provided by operating activities:
Provisions for loan portfolio
Provisions for depreciation of investments in securities Provisions for accounts receivable Provisions for adjudicated assets Provisions for contingent credits Minority Interests S Provision for Premiums Receivable Depreciations and amortizations Net variation in:
Accounts receivable
Interest receivable on loan portfolio
Yield receivable on investments
Other assets
Other accounts payable
Net Technical and Mathematical Reserves
Premiums Pending to be Contracted
Reinsurance and Guarantee Institutions
Other obligations with the public
Other liabilities
Interest and other financial charges payable
Net cash provided (used) by operations
Cash flow from investing activities:
Net credits granted in the year
Net variation of investments in securities
Reserve for Insurers and Guarantors
Acquisitions of fixed assets
Sales of fixed assets
Net cash provided (used) in investing activities Cash flow from financing activities:
Net variation in:
Obligations with the public
Obligations with the BCN
Obligations with financial institutions and for other financing Subordinated obligations Obligations convertible to capital Capital contributions Payment of dividends Net cash provided (used) in financing activities Net variation of cash and cash equivalents:
Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year See the notes accompanying the consolidated financial statements.
Include the accounts representative of each of the Subsidiaries.

37
SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS INSTRUCTION FOR ANNEX 6 - 6 CONSOLIDATION AND/OR COMBINATION WORKSHEET This Worksheet is composed of columns that aggregate financial information for the consolidation and/or combination of the balances of the members that make up a financial group, revealing the items that are eliminated between them at the date of consolidation, presenting the consolidated and/or combined balances at the level of: Class, Group, Account, Sub-account and Analytic Account:
COLUMN A: In this column, the accounts that make up the Current Unique Account Manuals (MUC) of the members that are part of a financial group are broken down. It should be noted that this breakdown includes information down to an analytic account level, however, in those cases that warrant it, financial instruments and/or important operations should be detailed in order to have a clear view of the operations that are eliminated between the members (by consolidation and/or combination) of the financial group. COLUMNS (B, C, D, and E): In columns (B, C, D) in their header, the name of the members that make up the financial group will be presented and in column (E), the "Total balances before consolidation adjustments" must be indicated. Likewise, in the lines corresponding to each member of the financial group, the balances required in the accounts described in column A must be recorded.

38
COLUMNS (F, G): In columns (F, G), the adjustments to eliminate the effects of transactions and other significant events by consolidation that exist between the members of the financial group must be detailed. COLUMN (H): In this column, the balances resulting from the consolidation must be detailed. COLUMNS (I, J, K): In column (I) in its header, the name of the member that is combining (in this column its individual financial statement is detailed) will be presented and in columns (J,K), the adjustments to eliminate the effects of transactions and other significant events by combination with the other members of the financial group are detailed. COLUMN (L): In this column, the result of the consolidated and/or combined financial statements of the financial group is detailed. SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS INSTRUCTION FOR ANNEX 6 – 6 - 1 ELIMINATION ADJUSTMENT ENTRIES FOR CONSOLIDATION AND/OR COMBINATION. In this annex, journal entries and separate and independent adjustments and eliminations for consolidation and/or combination must be presented, for example:
¾ Adjustment to create Minority Interests by Subsidiary ¾ Adjustment to eliminate the Holding Company's Investments in the Subsidiaries.
¾ Adjustment to eliminate transactions between Subsidiaries.
¾ Adjustment against Profits.
¾ Other Adjustments.
The balances of these will be transferred to the corresponding columns of
Annex 6 – 6, "Consolidation and/or Combination Worksheet".

39
Assets 200X 200Y
Deposits in Banks
Detail the names of the banks
Investments:
Detail the names of the institutions in which these investments are held Loans receivable:
Detail the names of the debtors
Loans receivable from related parties:
Detail the names of the debtors
Accounts receivable:
Detail the names of the debtors
Total assets
Liabilities
Demand deposits:
Detail the names of the depositors
Time deposits:
Detail the names of the depositors
Other accounts payable and provisions:
Detail the names of the creditors
Total liabilities
Results
Interest income:
On loans
Detail the names of the people who generated the income On investments:
Detail the names of the people who generated the income General and administrative expenses:
Detail the names of the people who generated the expenses All transactions with related parties must be detailed; the described detail is not limiting.
Type of Instrument or
Transaction Maturity Date
Type of Instrument or
Transaction Maturity Date
SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS.
Detail of balances and transactions with related parties (This detail must be prepared by each member of the financial group)
ANNEX 6 - 6 - 2

40
SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS
ANNEX 6 – 7.
MODELS OF NOTES TO CONSOLIDATED AND/OR COMBINED FINANCIAL STATEMENTS Below is a model of notes to consolidated and/or combined financial statements, this model is not limiting. The company__________________ must present all important facts of the consolidated and/or combined group. Notes to Consolidated and/or Combined Financial Statements. As of December 31, 200X and 200Y Note 1: Nature of Operations:
This note must contain a description of the Financial Group and each of the Institutions that make it up; under what laws and dates the individual Institutions and the Financial Group were constituted; the main activities of each of the Institutions that make up said Financial Group; the environment and organization of the individual Institutions and the Group; etc. Note 2: Monetary Unit and Exchange Regulations:
It must contain a disclosure about the currency in which the Financial Statements are expressed, indicating that it is the official currency of the Republic of Nicaragua. The official exchange rate of the cordoba with respect to the US dollar at the date the consolidated financial statements are presented, the Body that issues the exchange rates, a disclosure that there is a free exchange market authorized by the BCN, which operates through commercial banks, financial institutions and exchange houses, and is governed by supply and demand and if the similarity of the exchange rate of that free market with respect to the official exchange rate. Note 3: Summary of Main Accounting Policies and Presentation Bases:
An introductory paragraph must be presented that reveals the name of the group that was consolidated and/or combined (e.g. Company_________ and Subsidiaries); the identification of the financial statements presented, including the date of, and the period covered by the financial statements; the accounting basis on which the consolidated financial statements are prepared and presented; the Supervisory Body that issues accounting policies for each Institution of the Financial Group and a summary of the most significant accounting policies used by the company __________ and Subsidiaries in the

41 preparation and presentation of their financial statements. This summary must contain as a minimum the following accounting policies:
(a) Consolidation standards;
Example:
A disclosure of which are the Institutions that make up the Group and whose accounts were included in the Consolidated Financial Statements; as well as a disclosure of the percentage of participation or other forms of manifestation of control that the Holding Company possesses in each member of the financial group incorporated in the consolidation and/or combination. (b) Cash equivalents; Example:
This policy consists of disclosing that for the purpose of the cash flow statements, the company _____________ and Subsidiaries considers as cash equivalents all short-term investments of high liquidity, which are easily convertible into determined amounts of cash and which are subject to a insignificant risk of changes in their value, etc. (c) Investments:
Example:
A disclosure of the investment categories established in accounting standards, with their corresponding description and the recognition and measurement criteria for investments for each category or classification, etc. (d) Method to recognize interest income:
Example:
Disclosure on the application of the accrual accounting basis for the recognition of interest income on credits and the policy of suspension and regularization of interest for single-maturity credits and those payable in installments; as well as those classified in categories D and E. (e) Provisions for loan portfolio:
(f) Method to recognize income from issued premiums (g) Reserves for premiums receivable; (h) Costs for policy acquisition; (i) Provision for doubtful receivable accounts; (j) Provisions for assets received in recovery of credits; (k) Fixed assets; (l) Recognition of impairment of long-lived assets; (m) Interest on deposits; (n) Income tax; (o) Organization and installation expenses;

42
(p) Legal reserve;
(q) Use of estimates;
(r) Seniority indemnification;
(s) Technical and mathematical reserves (in case the latter exist); (t) Method of control and valuation of inventory of merchandise received in deposit; (u) Transactions in foreign currency and/or national currency with value maintenance; (v) Goodwill; (w) Recognition of income and costs for storage, custody and other services. Note 4: Changes in Accounting Policies:
Changes introduced in the methods and criteria used for the preparation of the consolidated and/or combined financial statements, with respect to those applied in the previous management, must be indicated, justifying the reasons for the changes and quantifying the effects they produced in the result of the period or management and in net equity. Note 5: Assets Subject to Restrictions:
When the company_________ possesses assets whose right of ownership over them is restricted, it must indicate it, clearly identifying the asset in question, its book value and the cause of the restriction. Examples of these restrictions are: balances in other entities frozen due to exchange restrictions in other countries or due to lawsuits filed against the company____________, assets encumbered as collateral for obligations of the company____________ or that have been seized. Note 6 Capital:
The amount of authorized, subscribed and paid-in capital must be indicated, in case there is unsubscribed capital, the dates for which the integration of the same has been committed must be mentioned. Regarding paid-in capital, the number of shares issued and their nominal value must be revealed, distinguishing between ordinary and preferred shares and for the latter mentioning the privileges and restrictions that correspond to them. In case there are restrictions on the distribution of dividends, for example derived from legal or statutory provisions, shareholder agreements, loan contracts or other agreements, Superintendency provisions, etc, the existing restrictions must be described and quantified. Note 7: Contingencies and Commitments:

43
Contingent situations from which obligations and/or losses could result for the company_________ and Subsidiaries that have not been accounted for because a reasonable estimate of the amounts involved could not be made or for other reasons must be described. In the case of contingencies that may result in a gain for the company__________ and Subsidiaries, they will only be mentioned when their occurrence is very probable. Other commitments assumed by the company________ and Subsidiaries must also be revealed even if they do not represent a contingency for it. Note 8: Balances and Transactions with Related Parties:
Detail of information on significant operations with persons (natural and legal) related to each of the members of the Group Financial, in assets, liabilities, contingencies, income and expenses. Likewise, a summary of the movements in credits, repurchase operations, options, or other operations carried out between the Institutions of the Group Financial, even if these have been eliminated in the consolidation and/or combination. Note 9: Position in Foreign Currency and in National Currency with Value Maintenance:
The balances for each of the foreign currencies in which the company___________ and Subsidiaries maintains active and passive balances at the end of the period must be reported, as well as, the balances in national currency with value maintenance. Note 10: Events After the Closing:
Events and/or transactions after the closing of the period that affect or may significantly affect the equity and financial situation of the company________ and Subsidiaries must be described and quantified. Note 11: Other Important Disclosures:
All other clarifications or additional explanations that are considered necessary or that are required by the Superintendency of Banks and Other Financial Institutions for an adequate interpretation of the financial statements must be included. Note 12: Cash and Cash Equivalents:
It must contain a comparative detail of the items and amounts of cash and cash equivalents that make up the balance of cash and cash equivalents for each accounting period presented; as well as a disclosure of the operations that compose the cash equivalents and the balances in foreign currency (dollars

44
Americans) that are included in the balance of available funds; a description of restricted available funds or those funds that are guaranteeing other operations carried out by the institution, in which case it must be mentioned that there are no restrictions on available funds.

Note 13: Investments in Securities:
Detail where the types of investments made by the Institution are described, whether in securities or equity instruments, presented by investment category and the amount of each of those investments on the dates of presentation of the comparative financial statements, a description of restricted investments or those that are guaranteeing other operations carried out by the institution, in which case it must be mentioned that there are no restrictions on investments.

Note 14: Operations with Securities and Derivatives:
Detail where the types of operations with securities and derivatives carried out by the Institution are described, presented by investment category and the amount of each of those investments on the dates of presentation of the comparative financial statements, a description of these restricted operations or those that are guaranteeing other operations carried out by the institution, in which case it must be mentioned that there are no restrictions on operations with securities and derivatives.

Note 15: Credit Portfolio:
It must contain a summary of credit balances (current, overdue, restructured, extended, and overdue) stratified by type of credit, together with the provision and its interest for the credit portfolio. This summary must be presented for each accounting period in which financial information is presented and must be sub-totalized by term and at the end present the net balance of the credit portfolio which must match what is revealed in the Consolidated and/or Combined Balance Sheet. Include a description of the restricted portfolio or that is guaranteeing other operations carried out by the institution, in which case it must be mentioned that there are no restrictions on the credit portfolio.

Additionally, a detail of the movement of the provision for the credit portfolio must be presented for each accounting period presented. This detail must be presented for both periods as follows:

200X 200Y
Balance at the beginning of the year C$
Plus:
Provision charged to the operations results

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Provision for the portfolio acquired

Provision for contingencies
Others
Less:
Credit write-offs
Provision transferred to assets acquired

Balance at the end of the year C$

Note 16: Accounts Receivable:
It must contain by period a summary of the balances of the most relevant Other accounts receivable, making comments on these and the criteria used to keep them in this item, as well as the provision for Other Accounts Receivable.

Note 17: Assets Received in Credit Recovery:
Detail by each period the balances of assets received in credit recovery and their accumulated provision, briefly commenting on what is relevant.

Note 18: Permanent Investments in Companies:
For permanent investments in companies in which the Institution has control of the majority of shares with voting rights or control is exercised by any means, it must be revealed, among other relevant information, for each member of the financial group, the following:
a) Percentage of participation in capital and the quantity and class of shares owned. b) Percentage of votes held (shareholder or signed control agreements). c) Amount of undistributed profits by the issuer to the entity, or uncovered losses. d) The figure of profits or losses of the period that are affecting the Statement of Results of the period of the Institution. e) The amount of dividends received from the issuer during the period.

Note 19: Fixed Assets:
Detail by period a summary of the items that make up Fixed Assets, describing those that were subject to revaluation; likewise, reveal the accumulated depreciation in each period, indicating the annual depreciation rate applied by item.

Note 20: Other Assets:

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Detail by each period the most important balances such as prepaid expenses, goodwill, deferred charges, with their amortization and accumulated provision, among other assets, briefly commenting on what is relevant.

Note 21: Obligations with the Public:
Detail and comment by period the balances of deposits in national and foreign currency, demand deposits that bear and do not bear interest, savings deposits, fixed-term deposits, and other deposits, comment on deposits that guarantee active operations of the institution, among other relevant comments.

Note 22: Other Obligations with the Public:
Detail by period the balances that make up this item, making comments if the case warrants it, for example: when a member of the group is a bond issuer, its interest rate, validity, among other comments.

Note 23: Operations with Securities and Derivatives:
Summary of Main Accounting Policies and Presentation Bases:

Note 24: Securities in Circulation:
Summary of Main Accounting Policies and Presentation Bases:

Note 25: Obligations Payable:
Detail by period the balances of obligations payable on demand, short-term and long-term, name of creditors (national and international agencies), describing the type of financial instrument, type of currency, payment method, agreed interest rates, maturity dates, type of guarantee backing these debts, the yield payable on these obligations, detail of future principal payments required on these obligations, etc.

Note 26: Technical Reserves:
Detail by period indicating the situation of established reserves and the policies for determining reserves applied.

Note 27: Other Accounts Payable, Other Liabilities and Provisions:
Detail by period of the balances of accounts payable, other liabilities and provisions, linking these accounts with the recognition and measurement policies described at the beginning of these notes.

Note 28: Subordinated and/or Convertible to Capital Obligations:
Detail by period indicating the name of the institution, the principal, interest rate, payment method, grace period, term, maturity, discretionary time in which the creditor may exercise their right of conversion into capital shares, etc.

Note 29: Financial Income (Expenses):

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Detail of information, summary of the main accounting policies and presentation bases.

Note 30: Income (Expenses) from Changes:
Detail of information, summary of the main accounting policies and presentation bases.

Note 31: Administrative Expenses:
Detail of information, summary of the main accounting policies and presentation bases.

Note 32: Contributions by Laws:
Detail of information, summary of the main accounting policies and presentation bases.

Note 33: Income Tax:
Detail of information, summary of the main accounting policies and presentation bases.

Note 34: Notes to the Statements of Cash Flows:
Detail of information, summary of the main accounting policies and presentation bases.

Note 35: Commitments (off-balance sheet accounts and operating leases):
Summary of Main Accounting Policies and Presentation Bases:

Note 36: Main Applicable Laws and Regulations:
Summary of the main laws and regulations applicable to each member of the financial group, as well as a narrative of their compliance.

Note 37: Risk of Financial Instruments:
Description and amounts; characterization of financial instruments derived and in national and foreign currency used (quantification and description). Description of Credit Risk, Contingent Accounts, Foreign Currency Exposure Risk, Liquidity and Financing Risk, Counterparty Risk.

Note 38: Fair Value of Financial Instruments:
Summary of Main Accounting Policies and Presentation Bases.

Note 39: Litigation:
Summary of pending litigation that any institution belonging to the Financial Group has.

(f) Antenor Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Roberto Solórzano Ch. (f) A. Cuadra G. (f) U. Cerna B.

48
ANTONIO MORGAN PÉREZ
Ad Hoc Secretary Board of Directors SIBOIF

Norma de los Grupos Financieros

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