Resolution Amending Article 11 of the Regulation on Liquidity Risk Management and Maturity Matching

Resolution No. CD-SIBOIF-887-3-ABR28-2015
Dated April 28, 2015

REGULATION REFORMING ARTICLE 11 OF THE REGULATION ON LIQUIDITY RISK MANAGEMENT AND MATURITY MATCHING

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

CONSIDERING

I
That on February 6, 2008, the Regulation on Liquidity Risk Management and Maturity Matching was approved, contained in Resolution No. CD-SIBOIF-521-1-FEB6-2008, published in La Gaceta, Official Gazette No. 53, on March 14, 2008, with the objective of establishing general guidelines to be followed by banking entities to measure and control the liquidity position and maturity matching of their active and passive operations.

II
That Article 11 of the aforementioned regulation establishes the criteria for the assignment of cash flows from the assets and liabilities of banks, requiring that these flows be classified in the time band associated with their residual maturity terms, as appropriate.

III
That among the bank's liabilities, there are obligations related to the payment of principal and interest on securities issuances, whose flows must be assigned entirely in the first time band, that is, from zero to seven days, according to what is established in subsection b), item 5) of Article 11 referred to above; however, due to the nature of this type of obligation, which has determined maturity terms, these flows should be assigned in the band corresponding to the payment flows of each issuance.

IV
That for the reasons expressed in the previous consideration, it is necessary to adjust the calculation methodology to measure and control the liquidity position and maturity matching of banks, particularly with respect to Article 11, subsection b), item 5) of the aforementioned regulation, which establishes the assignment criteria for flows from the "Other Obligations" account, in order to add to that provision that the cash flows of obligations registered in this account, which have determined maturity terms, shall be assigned to the corresponding time band according to their residual maturity terms.

V
That in accordance with the considerations set forth above and based on the authority granted by Article 3, item 13); and Article 10, items 1) and 2) of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

HAS ISSUED

The following:

CD-SIBOIF-887-3-ABR28-2015

REGULATION REFORMING ARTICLE 11 OF THE REGULATION ON LIQUIDITY RISK MANAGEMENT AND MATURITY MATCHING

FIRST: Article 11 of the Regulation on Liquidity Risk Management and Maturity Matching, contained in Resolution No. CD-SIBOIF-521-1-FEB6-2008, of February 6, 2008, published in La Gaceta, Official Gazette No. 53, of March 14, 2008, is hereby amended, which shall read as follows:

"Art. 11 Assignment Criteria for Flows. The following assignment criteria for flows shall apply. For all purposes, cash flow shall be understood as the principal and interest to be received and paid; in addition, future interest flows corresponding to each time band established in this regulation shall be included. Provisions are not included, as estimates are not cash flows.

a) All cash flows originating from any asset, valid as of the date of their respective measurement, shall be classified by banks.

1) Liquidity: Cash and demand deposits shall be assigned entirely in the first time band.

2) Investments at Fair Value with Changes in Results and Available-for-Sale Investments: These, regardless of their residual maturity term, shall be assigned entirely in the first time band (at net book value less market depreciation), with a weighting factor of 0.85 applied to the book value.

3) Held-to-Maturity Investments: The cash flows associated with these investments shall be assigned to the corresponding band according to the residual maturity terms.

4) Securities and Derivatives Transactions: The cash flows associated with these investments shall be assigned to the corresponding band according to the residual maturity terms.

5) Credit Portfolio: The cash flows associated with the credit portfolio shall be assigned to the corresponding band according to the residual maturity terms, classified into categories "A" and "B". In the case of cash flows associated with the credit card portfolio, they shall be assigned according to the monthly average of recoveries over the last twelve months. The resulting average amount shall be recorded in the 16 to 30 days band and proportionally to the period represented by the subsequent bands, until the coverage of the principal balance, interest, and associated charges is reached.

6) Other Accounts Receivable: The cash flows associated with other accounts receivable shall be assigned to the corresponding band according to the residual maturity terms, except those without a maturity date, which shall be assigned in the first time band.

b) All cash flows originating from any liability or other obligations shall be classified by banks.

1) Demand Deposits: These shall be assigned entirely in the first time band.

2) Savings Deposits: The cash flows associated with savings deposits shall be assigned, with 25% of their balance, in the first time band.

3) Time Deposits: The cash flows associated with time deposits shall be assigned to the corresponding band according to the residual maturity terms.

4) Other Public Deposits: These shall be assigned entirely in the first time band.

5) Other Obligations: These shall be assigned entirely in the first time band, except those with a determined maturity term, which shall be assigned to the corresponding band according to the residual maturity terms.

6) Obligations with Financial Institutions and Other Financing: In the case of demand deposits, the provisions of subsection b), item 1) of this article shall apply. Otherwise, they shall be assigned to the corresponding band according to the residual maturity terms.

7) Obligations with the Central Bank of Nicaragua: The cash flows associated with obligations with the BCN shall be assigned to the corresponding band according to the residual maturity terms.

8) Securities and Derivatives Transactions: The cash flows associated with these obligations shall be assigned to the corresponding band according to the residual maturity terms.

9) Other Accounts Payable: The cash flows associated with other accounts payable shall be assigned to the corresponding band according to the residual maturity terms, except those without a maturity date, which shall be assigned in the first time band; with the exception of labor liabilities, the amount of which must be multiplied by the average personnel turnover factor of the last twelve months. The resulting value will be the amount the entity could pay for labor liabilities given its observed turnover index. This amount shall be assigned in each time band, proportionally, in the same manner as the average credit card recoveries were assigned.

10) Subordinated Obligations: The cash flows associated with subordinated obligations not convertible into capital shall be assigned to the corresponding band according to the residual maturity terms.

11) Contingent Obligations: The estimated amount of contingent obligations shall be assigned in the corresponding band according to the date on which they become effective."

SECOND: This regulation shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette. Irrelevant parts follow. (f) Ovidio Reyes R.
(f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Fausto Reyes B. (f) illegible (Silvio Moisés Casco Marenco) (f) illegible (Freddy José Blandón Argeñal) (f) U. Cerna B. Secretary.

URIEL CERNA BARQUERO
Secretary of the Board of Directors SIBOIF