Regulation on Appraisers Providing Services to Financial System Institutions

Resolution No. CD-SIBOIF 868-1-DIC10-2014
Date: December 10, 2014
REGULATION ON APPRAISERS PROVIDING SERVICES TO FINANCIAL SYSTEM INSTITUTIONS

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

CONSIDERING

I
That Article 10 of Law 316, the Law of the Superintendence of Banks and Other Financial Institutions; as amended by Law 552, the Law of Reforms to the aforementioned Law 316, in its subsection 7), establishes that it is the authority of the Board of Directors of the Superintendence to regulate all matters related to appraisers providing services to financial system institutions.

II
That the valuation of assets received as collateral for the granting of credits; assets in use; or assets adjudicated to financial institutions supervised by the Superintendence, constitutes one of the most appropriate mechanisms to determine their solvency preventively.

In exercise of its powers,

RESOLVES

To issue the following Regulation:

Resolution No. CD-SIBOIF 868-1-DIC10-2014
REGULATION ON APPRAISERS PROVIDING SERVICES TO FINANCIAL SYSTEM INSTITUTIONS

CHAPTER I
CONCEPTS, OBJECT, AND SCOPE

Article 1. Concepts.- For the application of this regulation, the concepts indicated in this article, whether in uppercase or lowercase, singular or plural, shall have the following meanings:
a) Appraisal: It is the technical tool for performing valuation. b) Valuation Criteria: They constitute a specific form of analysis for the formation of the cost and/or value of an asset, which ensures it meets the purpose for which the appraisal is performed. c) Days: Calendar days, unless it is expressly stated that they refer to business days. d) Appraiser Status: The modality in which the appraiser is registered in the REPEV to provide their services, either as:

• Independent natural person;
• Natural person serving a financial institution; or
• Natural person serving a legal entity registered as an appraiser.
  e) Financial Institution or Financial Institutions: Refers to banks and non-bank financial institutions subject to the supervision of the Superintendence of Banks and Other Financial Institutions. f) General Banking Law: Law No. 561, “General Banking Law, Non-Bank Financial Institutions and Financial Groups,” published in La Gaceta, Official Gazette No. 232, on November 30, 2005. g) NIPEV: Appraiser Identification Number. h) Appraisers: Natural or legal persons with specialization and proven experience in appraisal work, who provide services to Financial Institutions. i) REPEV: Register of Appraisers under the charge of the Superintendence. j) Superintendence: Superintendence of Banks and Other Financial Institutions. k) Superintendent: Superintendent of Banks and Other Financial Institutions. l) Valuation: It is the process of developing an opinion of value of an asset, based on predetermined parameter(s); it is the product itself of the valuation, the resulting report.

Article 2. Object.- This Regulation aims to regulate the following:
a) The functioning of the REPEV as a database, registry, authorization, control, and follow-up of authorized appraisers and of the valuation reports carried out by them, in Financial Institutions supervised by the Superintendence; b) The establishment of procedures and requirements for registration in the REPEV; c) The determination of obligations and responsibilities of supervised financial institutions and of appraisers who register in said REPEV; d) The regime of infractions and sanctions applicable to appraisers registered in the REPEV; e) The minimum content of valuation reports that appraisers must submit; and f) Other aspects related to the activities performed by appraisers providing services to financial institutions.

Article 3. Scope.- The provisions of this Regulation are applicable to all financial institutions that require the services of valuation of assets received as collateral, connected with credit operations (loans, guarantees, endorsements, among others); assets in use; assets adjudicated to them; and assets in general for the purpose of issuing insurance policies.

CHAPTER II
REQUIREMENTS, PROCEDURE, AND IMPEDIMENTS FOR REGISTRATION IN THE REPEV

Article 4. Register of Appraisers.- The Register of Appraisers (REPEV) of the Superintendence is that in which natural or legal persons providing appraisal services of assets to supervised financial institutions must register. Registration in the REPEV will enable registered subjects to exercise the function of asset valuers for said institutions. For all legal effects, it must be understood that the legal existence of the REPEV created pursuant to Resolution CD-SIBOIF-227-1-NOV2-2002, issued by the Board of Directors of the Superintendence and published in La Gaceta, Official Gazette No. 230, on December 3, 2002, has remained without interruption since the entry into force of the aforementioned Resolution.

Registration in the REPEV is exempted for natural persons serving a financial institution as permanent staff, who perform appraisals of assets received as collateral for microcredit operations, in accordance with what is established in Article 17 of this Regulation.

Article 5. Minimum Qualifications of Interested Parties.- Interested parties wishing to be registered in the REPEV must meet the following minimum qualifications:
a) For professionals and technicians: Interested parties must demonstrate their academic preparation by presenting the original and copy of their professional title, aligned with the specialty in which they wish to be authorized (the original will be returned once verified). Likewise, they must have a minimum experience of two (2) years in Nicaragua or abroad, which must be accredited by presenting at least ten (10) valuations with their corresponding reports that they have carried out in this period and that are representative of the type of asset in which they have specialized. Likewise, they must present a summary table of said appraisals, which must contain at least: the purpose of the appraisal, the type of asset and its location, name and phone number of their client, person or institution that requested the appraisal, and date of the valuation performed. The documentation supporting these valuations must be made available to the Superintendence when requested. b) For non-professionals: Interested parties who do not have a professional or technical degree must demonstrate a minimum experience of five years in this work, in Nicaragua or abroad, either continuously or discontinuously, by presenting at least twenty (20) valuations with their corresponding reports that they have carried out in that period and that are representative of the type of asset in which they have specialized. Likewise, they must present a summary table of said appraisals which must contain at least: the purpose of the appraisal, the type of asset and its location, name and phone number of their client, person or institution that requested the appraisal, and date of the valuation performed. The documentation supporting these valuations must be made available to the Superintendence when requested.

In both cases, they must not be subject to any of the impediments established in Article 12 of this Regulation.
For the purposes of this article, persons who participate as collaborators in valuations carried out by appraisers registered in the REPEV will have their accumulated experience in this matter recognized by presenting the appraisal reports in which they participated; in which the signature of the interested party must appear to accredit their participation as a collaborator.

Article 6. Information Requirements.- In addition to what is established in the preceding article, interested parties must present the following information to the Superintendent:
a) Natural Persons:
1) Request letter, manifesting their interest in being registered in the REPEV, according to the Request Format contained in Annex No. 1, which becomes an integral part of this regulation. In the case of a natural person serving a financial institution, the registration request and other procedures will be carried out by the interested party, complying with all requirements contained in Articles 5 and 6 of this regulation.
2) Description of the equipment and other resources available to support them in the valuation function of the type of assets for which they wish to be registered.
3) Description of the methodology applied for performing appraisals, according to the specialty for which they wish to be registered.
4) Notarial declaration according to Annex No. 2, which becomes an integral part of this regulation.
5) Any other information required by the Superintendent.
b) Legal Persons: In addition to what is required in the preceding subsection, they must present the following information:
1) Deed of incorporation and bylaws of the society duly registered;
2) Certification of the Board of Directors Meeting Minutes authorizing the legal representative of the society to request registration in the REPEV;
3) Power of Attorney of the Legal Representative;
4) Address and phone number of the company;
5) RUC Number (Taxpayer Identification Number);
6) The natural persons who on behalf of the legal entity will perform appraisal duties must comply with what is provided in Article 5 of this Regulation and with the requirements established in subsection 1) of subsection a) of this article. For this purpose, said persons will personally present their registration request;
7) Curriculum Vitae of partners, directors, and administrators; and
8) Description of the organization of the society, which must contain:
i. Company organizational chart;
ii. Description of the functions of each component of the organizational chart;
iii. List of personnel and positions; and
iv. Certified Financial Statements.

Article 7. Deadline for Submission of Information.- In the event that incomplete applications are received or the required information does not conform to what is established in this regulation, the interested party will have a maximum deadline of thirty (30) days to correct the omission or error. If no response is received upon expiration of said deadline, the application will be considered withdrawn and archived.

Article 8. Publication.- Once the information indicated in the preceding articles has been submitted on time and in due form and having been analyzed by the Superintendent, interested parties must publish their application by notice twice in a widely circulated national written medium, informing about the submission of said application and calling upon any person to formulate any well-founded objection to their registration, no later than fifteen (15) days counted from the date of publication of the last notice, for which the format contained in Annex No. 9 of this regulation must be used, which is an integral part of it. In case the interested party is a legal person, the aforementioned notice must detail the names of the partners, directors, and/or representatives of the society. There must be between ten (10) and fifteen (15) days between both publications. Once the aforementioned deadline has passed, the Superintendent will proceed to register the interested party in the REPEV.

Article 9. Registration.- Once the information and publication requirements mentioned above have been met, the Superintendent will grant the registration authorization within a deadline that does not exceed fifteen (15) days. This authorization will consist of a registration certificate that will have a validity of three (3) years from its date of issuance. The content of said certificate will be that established in the Format appearing in Annex No. 8, which becomes an integral part of this regulation.

Article 10. Identification Number.- Once the registration application of the natural or legal person in the REPEV is approved, the Superintendence will assign a unique identification number to the authorized appraiser, which will appear as the Appraiser Identification Number (NIPEV), which is indispensable for said appraiser to provide services to supervised financial institutions.

Article 11. Valuation Specialties.- The authorization of valuation specialties granted to appraisers will be classified according to the nature of the assets to be valued in accordance with the specialties described in Annex No. 3, which becomes an integral part of this regulation.

The Appraiser requesting an expansion of specialties must do so in writing complying with the following requirements:
a) Indicate the new specialties for which they wish to be authorized; b) Present, at least, ten (10) appraisals with their corresponding reports, which are representative of the specialty they are requesting; as well as, a summary table of said appraisals, detailing the purpose of the appraisal, the type of asset and its location, name and phone number of the client, and the date of the appraisal; c) Present certificates or diplomas of training on the requested specialty, if applicable; d) Present the methodology used; e) Present notarial declaration contained in Annex 2 of this regulation; and f) Present records from institutions or persons to whom the interested party has provided valuation services in the requested specialties.

Article 12. Impediments.- The following persons cannot be registered, nor renew their registration in the REPEV:
a) Those convicted by final judgment for intentional crimes. b) Those prosecuted for potential criminal liabilities, provided that this fact constitutes, in the judgment of the Superintendent, a cause of substantiated doubt regarding their conduct. c) Having left unpaid any debt in the financial system imputed judicially, having been forced to make a payment arrangement to the detriment of their creditors, or having been declared bankrupt. This impediment prescribes after seven (7) years from the imputation of the action. d) Having a debt with any institution of the financial system to which at least fifty percent (50%) of provision has been constituted, according to norms issued by the Superintendence. e) Employees of the Superintendence; f) Those who have been directors, managers, or employees of financial institutions intervened by the Superintendence, at the time of intervention or in the two (2) years prior, provided that administratively they were found responsible for acts that warranted sanction. g) Officers, analysts, executives, credit supervisors, or any other person, who within the financial institution carry out activities of recommendation, approval, or administration of credit or guarantees. h) Those who, as directors, managers, or employees of a public or private legal entity, have been administratively sanctioned for illicit acts by the respective competent authority. i) Those sentenced for damages and losses due to the provision of valuation services. j) Those sanctioned with cancellation of their registration in the REPEV. k) The presence of reasonable evidence regarding any other situations that raise serious doubt about their conduct. l) Other cases that the Superintendent considers pertinent, by reasoned resolution.

If, while the appraiser is registered in the REPEV, any of the impediments indicated in the preceding subsections arise, the registration will automatically be considered suspended or cancelled depending on the case, and will be notified in writing to the appraiser. The Superintendence will inform financial institutions about said suspension or cancellation. Regarding legal persons, they cannot be registered in the REPEV if they or their current partners or directors are subject to any of the impediments mentioned in this article. The impediments referred to in this article, except for that established in subsection c) thereof, prescribe once the imputed action has been remedied or disproven.

CHAPTER III
RENEWAL AND CHANGE OF STATUS

Article 13. Renewal.- Renewals of registration must be requested to the Superintendent at least thirty (30) days before the expiration date. A renewal process will be considered initiated with the presentation of the respective request according to the Format contained in Annex No. 4, which is an integral part of this regulation, attaching the complete required information and documentation. Appraisers who have not submitted their registration renewal request within said deadline will be automatically excluded from the REPEV.

Once the information referred to in the preceding paragraph is submitted on time, the Superintendent will have a deadline of thirty (30) days to resolve the submitted request. The appraiser may continue to operate as long as they do not receive any objection regarding this from the Superintendent. In case of objections, the appraiser must correct the deficiencies within a maximum deadline of thirty (30) days counted from the respective notification. Once the indicated deficiencies are corrected, the Superintendent will resolve the renewal request no later than within a deadline of ten (10) business days, counted from the submission of the required information.

Article 14. Requirements for Renewal.- Appraisers registered in the REPEV who wish to renew their authorization to operate must present the following information to the Superintendent:
a) Letter of request for renewal in the REPEV, according to Annex No. 4. b) Updated Curriculum Vitae. c) Notarial Declaration according to Annex No. 2. d) Detail of all valuations performed in the last authorization period, indicating, among others, the following information:
1) Name and phone number of the client;
2) Person or institution that requested their services;
3) Specialty;
4) Type of asset and its location;
5) Date of performance of the appraisal; and
6) Amount of the valuation performed.
In case the applicant has not performed valuations during the last authorized period, they must present an explanatory letter of the particular circumstances that prevented them from doing so. The Superintendent may require the presentation of copies of the appraisal reports performed in the last authorized period. e) Records from the institutions where they provided valuation services during the last authorized period. f) Not being subject to any of the impediments referred to in Article 12 of this Regulation. g) Any other information required by the Superintendent.

Once the aforementioned requirements have been met, the Superintendent will renew the registration certificate within a deadline that does not exceed thirty (30) days counted from the presentation of the complete required information. Said certificate will have a validity of three (3) years from its date of issuance.

Article 15. Change of Status.- The Appraiser may request a change of status in the REPEV. To this effect, the interested party must comply with the following information requirements, according to the status they request:
a) Independent natural person, to natural person serving a financial institution or to a legal entity registered as an appraiser:
1) Request letter indicating the current status and the requested status.
2) Certificate from the appraisal company or financial institution where the appraiser will provide valuation services.
3) Notarial Declaration according to Annex No. 2 of this regulation.
b) Natural person serving a financial institution or a legal entity registered as an appraiser, to independent natural person:
1) Request letter indicating the current status and the requested status.
2) Certificate from the appraisal company or financial institution where the appraiser provided valuation services.
3) Methodology to be used according to the specialty.
4) Detail of equipment and other resources for the exercise of valuation.
5) Notarial Declaration according to Annex No. 2 of this regulation.

Once the aforementioned requirements have been met, the Superintendent will grant the authorization for change of status within a deadline that does not exceed fifteen (15) days, maintaining the NIPEV assigned to the appraiser.

CHAPTER IV
SELECTION AND INCOMPATIBILITIES OF APPRAISERS

Article 16. Selection.- For the execution of any type of appraisal, regardless of its amount, appraisers registered in the REPEV who are not serving the financial institution as permanent staff must be hired, except in the cases indicated in the following article.

Article 17. Exceptions.- The following appraisals are exempt from the provisions of the preceding article:
a) Valuations of assets received as collateral for credits in the agricultural sector, which may be performed by appraisers registered in the REPEV who are serving the financial institution as permanent staff, except in the following cases:
1) When the debtor is a related party of the financial institution;
2) When the credit is to be subject to restructuring and has an amount equal to or greater than the equivalent in national currency to one hundred thousand United States dollars (US$100,000.00);
3) When the credit before considering the collateral is classified as “B” or lower and the appraisal is to be used to improve the classification of the debtor;
4) In case of adjudicated assets whose book value is greater than the equivalent in national currency to one hundred thousand United States dollars (US$100,000.00);
5) In case of eligible real guarantees as risk mitigants, according to the regulations on credit risk management; or
6) When, in the reasoned judgment of the Superintendent, it is considered necessary.
b) Valuations of assets in the concept of counter-guarantees for guarantee lines, regardless of their amount, provided that the guaranteed party is not a related party of the issuing institution, which may be performed by appraisers registered in the REPEV who are serving the insurance company as permanent staff. c) Valuations of assets in general for the purpose of issuing insurance policies, regardless of their amount, which may be performed by appraisers registered in the REPEV who are serving the insurance company as permanent staff. d) Valuations of assets given as collateral classified as “Guarantees for Microcredits” (appliances, furniture and household items, among others) for amounts not greater than the equivalent in national currency to ten thousand United States dollars (US$10,000.00).